Financing and securitization structure for a portfolio of loans

ABSTRACT

A computer system for monitoring and enhancing the collateral security underlying a set of loans is provided, including a system for calculating the unsecured value of the set at any time and for initialing additional collateral enhancement instruments when the unsecured value exceeds a certain limit. The system may include a variety of modules in communication with a relational database for storing data about the loans and system elements. The computer system may also be configured to allocate, manage, and execute the waterfall or cascade of funds between and among the various participants in a financial plan. The invention also includes a structured finance plan and related methods for enhancing the collateral security of a loan obtained for a life insurance or annuity product, and a system and method for managing a portfolio of such loans in order to obtain favorable financing and to facilitate securitization.

CROSS-REFERENCE TO RELATED APPLICATIONS

This patent application is based on PCT Application NumberPCT/US2005/028159, filed Aug. 8, 2005, which claims priority from U.S.Provisional Application No. 60/599,532, filed Aug. 6, 2004. The contentsof all of the above-listed applications are hereby incorporated byreference.

BACKGROUND

1. Technical Field

The following disclosure relates generally to the active monitoring andmanaging of a portfolio of loan obligations, and, more particularly, toa computer system and related methods for evaluating, selecting, andexecuting one or more financial instruments to enhance the collateralsecurity for a portfolio of loans in order to obtain financing andfacilitate securitization.

2. Description of Related Art

Computer systems are helpful tools in the management of financialproducts such as loans and insurance. Over the years, as computing speedand capacity has increased, the computer database has grown in itscapacity to store and process large amounts of data in one or moretables. Relational databases may include multiple tables, linkedtogether, wherein each table can be configured to store a certain typeof data. Relational database systems may provide a structure in which towork, but many modern financial plans, financing structures, andproducts require the design and construction of a system tailored to fitthe needs of the particular plan.

In the field of life insurance and annuity products, a policy or productmay be purchased and the premium paid in monthly installments. As analternative, a loan may be obtained and used to pay the premium all atonce, in one or more lump-sum payments. The borrower may sign apromissory note or other agreement to make payments on the loan. Thevalue of the policy or product itself may provide a basic level ofcollateral security for the loan, but typically there is a gap betweenthe value of the policy or annuity and the amount of premium paid,especially at the beginning of the life of the policy. The gaprepresents an amount at risk that is generally unsecured by anycollateral.

The amount of the gap often has a direct effect on the pricing and otherterms of a premium loan. A higher gap amount, for example, may requirethe borrower to pay a higher interest rate. In other words, lessattractive borrowing rates are available for loans when there is ahigher gap amount, because the amount of the gap affects the lender'sexposure in the event of default with respect to the loan.

The amount of the gap typically changes over time, depending on avariety of ever-changing factors including but not limited to the amountof premium paid to-date, the actuarial risk of surrender, theaccumulated value of the policy or product, the cash value of thepolicy, the commissions paid by the carrier or insurer, the creditingrate of the particular carrier, and other factors affected by thespecific terms and conditions of the policy. One technical problem inthe field is the lack of a system for analyzing the effect of all thesefactors, over time, in order to monitor the changing value of theunsecured gap.

Another technical problem in the field is presented by the complicatedtask of analyzing and monitoring the gap amount for multiple policies orproducts. The task of analyzing the gap amount grows much morecomplicated when multiple loans must be evaluated. The task growsfurther complicated when each loan in a group of multiple loans hasdifferent terms and provisions, various kinds of underlying collateralsecurity, and a different risk profile. Thus, there is a need in the artfor a system for continually monitoring and evaluating the defaultexposure associated with a set of loans, over time, as the loan status,amount at risk, product values, and risk of default are progressivelychanging.

Yet another technical problem when multiple loans are financed as agroup is the technical challenge of applying and allocating periodicloan payments between and among the various operating and escrowaccounts of the lender, loan originator, credit provider, loan servicer,and other agents and participating entities. Proper allocation ofpayments is required to satisfy the terms of the contractual agreementsbetween and among the parties. In addition, when multiple loans areinvolved, the allocation of payments may affect the gap amount. In thisaspect, the technical problem of allocating funds is related to thetechnical challenge of monitoring and analyzing the gap amount.

The need in today's financial markets for an accurate andup-to-the-minute risk assessment for loan obligations, especiallypremium loans for products having a varying gap amount, represents atechnical challenge because of the number of variables that must beanalyzed in order to produce an accurate, reliable, and creditworthyevaluation.

SUMMARY OF THE INVENTION

The following summary is not an extensive overview and is not intendedto identify key or critical elements of the apparatuses, methods,systems, processes, and the like, or to delineate the scope of suchelements. This Summary provides a conceptual introduction in asimplified form as a prelude to the more-detailed description thatfollows.

The above and other needs are met by the present invention whichprovides a computer system for managing the total risk exposure for aplurality of loans, each of the loans used to purchase an insurance orannuity product. The computer system may include a finance moduleconfigured to combine the plurality of loans into a portfolio; calculatean aggregate risk for the portfolio, based on the current gap value ofeach insurance product in the portfolio, the current gap value minimizedby the execution of one or more gap enhancement instruments such thatthe aggregate risk is sufficient to obtain a credit facility forfinancing the plurality of loans; and provide the aggregate risk resultsfor the purpose of obtaining and maintaining the credit facility for theportfolio, the credit facility having terms generally more favorablethan would be available for an individual loan selected from theplurality of loans.

The finance module may be further configured to calculate an aggregateyield for the portfolio, based on the yield of each loan in theportfolio; and provide the aggregate yield results for the purpose ofobtaining and maintaining the credit facility.

The finance module may be further configured to provide the aggregaterisk results to a loan purchaser wherein the results are of sufficientquality to permit the loan purchaser to issue a variable funding note tofinance the purchase of the portfolio of loans; and coordinate thepurchase of the variable funding note by a VFN purchaser.

The aggregate risk results may be of sufficient quality to permit theloan purchaser to act as a bankruptcy-remote special-purpose entity andto receive the portfolio of loans in a true sale, thereby furtherenhancing the creditworthiness of the portfolio of loans.

The finance module may be further configured to provide the aggregaterisk results to an investment bank wherein the results are of sufficientquality to permit the issuance of asset-backed security interests in theportfolio of loans, suitable for trading in the capital markets tomultiple investors. The asset-backed security interests may includecommercial paper or a ratable pool of asset-backed securities. Thefinance module may also be further configured to provide the aggregateyield results to the investment bank.

In another aspect, the present invention provides a computer system formanaging the total risk exposure for a plurality of loans, each of theloans used to purchase an insurance or annuity product. The computersystem may include a gap enhancement module configured to retrieve fromthe database a current amount at risk for each insurance product, thecurrent amount at risk including the premium paid; retrieve from thedatabase a current value of each insurance product, the current valuecalculated based at least in part on (a) the current net cash value ofthe product, (b) the current accumulated value of the product, and (c)the current collateral value of the one or more instruments providingcollateral security for the loan; calculate a current gap value for eachinsurance product, the current gap value representing the differencebetween the current amount at risk and the current value; compare thecurrent gap value to a limit; if the current gap value exceeds thelimit, identify and select one or more gap enhancement instruments fromamong a plurality of gap enhancement instruments designed to reduce thecurrent gap value; and update the current collateral value to includethe value of the selected one or more gap enhancement instruments.

The gap enhancement module may be further configured to compare the oneor more gap enhancement instruments; identify a selected gap enhancementinstrument from among the one or more gap enhancement instruments; andinitiate the execution of the selected gap enhancement instrument.

The computer system may also include a finance module configured tocombine the plurality of loans into a portfolio; calculate an aggregaterisk for the portfolio, based on the current gap value of each insuranceproduct in the portfolio, the current gap value minimized by theexecution of one or more gap enhancement instruments such that theaggregate risk is sufficient to obtain a credit facility for financingthe plurality of loans; and provide the aggregate risk results for thepurpose of obtaining and maintaining the credit facility for theportfolio, the credit facility having terms generally more favorablethan would be available for an individual loan selected from theplurality of loans.

The finance module may be further configured to calculate an aggregateyield for the portfolio, based on the yield of each loan in theportfolio; and provide the aggregate yield results for the purpose ofobtaining and maintaining the credit facility.

The finance module may be further configured to provide the aggregaterisk results to a loan purchaser wherein the results are of sufficientquality to permit the loan purchaser to issue a variable funding note tofinance the purchase of the portfolio of loans; and coordinate thepurchase of the variable funding note by a VFN purchaser.

The aggregate risk results may be of sufficient quality to permit theloan purchaser to act as a bankruptcy-remote special-purpose entity andto receive the portfolio of loans in a true sale, thereby furtherenhancing the creditworthiness of the portfolio of loans.

The finance module may be further configured to provide the aggregaterisk results to an investment bank wherein the results are of sufficientquality to permit the issuance of asset-backed security interests in theportfolio of loans, suitable for trading in the capital markets tomultiple investors. The asset-backed security interests may includecommercial paper or a ratable pool of asset-backed securities. Thefinance module may also be further configured to provide the aggregateyield results to the investment bank.

In the computer system, the plurality of gap enhancement instruments mayinclude a promissory note for each loan executed by a borrower in favorof a loan originator, and a collateral assignment of the insuranceproduct executed by the insured in favor of the loan originator. The gapenhancement instruments may also include asset of the borrower pledgedto the loan originator as collateral for the loan. The gap enhancementinstruments may also include a UCC-1 statement filed to memorialize thepledge of the asset as collateral. The gap enhancement instruments mayalso include a compensation agreement between the insured and theborrower where the borrower is an employer of the insured. The gapenhancement instruments may also include an agreement to postponepayment of a portion of the commission earned when the product is sold.The gap enhancement instruments may also include a rider on the productwaiving a portion of a surrender fee, in favor of the loan originator,the surrender fee representing an amount charged in the event theproduct is surrendered or the borrower defaults on the loan.

The gap enhancement instruments may also include an agreement to depositfunds in a reserve account, the funds representing a portion of asurrender fee, the surrender fee representing an amount charged in theevent the product is surrendered or the borrower defaults on the loan.The funds may also represent a marketing allowance owed by a carrier tothe loan originator, the marketing allowance including a portion of thecosts associated with marketing the policy or product.

The gap enhancement instruments may also include an agreement by the aninsurer, in the event of a surrender or default event, to extend a loanto the loan originator in an amount nearly equal to the current gapvalue, wherein the loan originator's repayment obligation to the insureris ultimately secured by the pledged asset. The gap enhancementinstruments may also include an agreement by a carrier to pay amarketing allowance to the loan originator, the marketing allowanceincluding a portion of the costs associated with marketing the policy orproduct.

In another aspect, the present invention provides a computer system formanaging the total risk exposure for a portfolio of loans, each used topurchase an insurance or annuity product. The computer system may beconfigured to calculate a current surrender rate based on the surrenderdata for the products in the portfolio, the surrender data comprisingthe surrender date, product type, product age, carrier identifier, cashvalue, and surrender charge; compare the current surrender rate to adesired surrender rate, the desired surrender rate established based oncurrent market conditions and adjusted periodically; if the currentsurrender rate is greater than the desired surrender rate, calculate apre-payment penalty designed to discourage surrender; if the currentsurrender rate is less than the desired surrender rate, calculate asurrender bonus designed to encourage surrender; and apply thepre-payment penalty or the surrender bonus to a new loan underconsideration for entry into the portfolio.

The computer system may also be configured to direct the loan originatorto impose the pre-payment penalty or the surrender bonus as a provisionof the loan, separate from any the surrender charge imposed by theinsurer.

The computer system may also be configured to compare a forecastsurrender rate to the current surrender rate, the forecast surrenderrate based upon an actuarial evaluation performed by or on behalf of theproduct carrier; request adjustment of the actuarial evaluation based onthe current surrender rate; and request an adjustment of thepolicy-related charges for one or more products based upon theadjustment of the actuarial evaluation. The system may also beconfigured to request compensation for the calculation of the currentsurrender rate, the compensation taking the form of an additionalcommission, an additional loan fee, an additional crediting rate to thepolicy in the form of a persistency bonus, an additional marketingallowance, or more favorable underwriting treatment. The computer systemmay also be configured to adjust the terms and provisions of the loan,based upon the adjustment of the actuarial evaluation.

In another aspect, the present invention provides a computer system formanaging the total risk exposure for a portfolio of loans, each used topurchase an insurance or annuity product. The computer system may beconfigured to record surrender data when a surrender event occurs forany one of the products, the surrender data comprising the surrenderdate, product type, product age, carrier identifier, cash value, andsurrender charge; calculate a current surrender rate based on thesurrender data for the products in the portfolio; compare the currentsurrender rate to a desired surrender rate, the desired surrender rateestablished based on current market conditions and adjustedperiodically; if the current surrender rate is greater than the desiredsurrender rate, calculate a pre-payment penalty designed to discouragesurrender; if the current surrender rate is less than the desiredsurrender rate, calculate a surrender bonus designed to encouragesurrender; and apply the pre-payment penalty or the surrender bonus toone or more loans within the portfolio of loans.

The computer system may also be configured to direct the loan originatorto impose the pre-payment penalty or the surrender bonus as a provisionof the loan, separate from any the surrender charge imposed by theinsurer.

The computer system may also be configured to retrieve current loan datafor one or more loans in the portfolio, the current loan data comprisinga start date, a product type, a current age, a carrier identifier, acurrent cash value, a current surrender charge; compare the current loandata to the surrender data; calculate a similarity factor for estimatingthe extent of similarity between the current loan data and the surrenderdata; and if the similarity factor exceeds a similarity threshold, thenadd the loan corresponding to the current loan data to the select one ormore loans within the portfolio of loans selected to receive thepre-payment penalty or the surrender bonus.

The computer system may also be configured to compare a forecastsurrender rate to the current surrender rate, the forecast surrenderrate based upon an actuarial evaluation performed by or on behalf of theproduct carrier; request adjustment of the actuarial evaluation based onthe current surrender rate; and request an adjustment of thepolicy-related charges for one or more products based upon theadjustment of the actuarial evaluation. The system may also beconfigured to request compensation for the calculation of the currentsurrender rate, the compensation taking the form of an additionalcommission, an additional loan fee, an additional crediting rate to thepolicy in the form of a persistency bonus, an additional marketingallowance, or more favorable underwriting treatment. The computer systemmay also be configured to adjust the terms and provisions of the loan,based upon the adjustment of the actuarial evaluation.

In another aspect, the present invention provides a computer system formanaging the total risk exposure for a portfolio of loans, each used topurchase an insurance or annuity product. The computer system mayinclude an accounts management module configured to retrieve paymentdata from the one or more data tables, the payment data includingdetails about payments received for the loans; maintain a list ofinstructions based on one or more contractual agreements establishedbetween and among the entities related to the portfolio of loans;distribute funds, based on the payment data, according to the list ofinstructions; and provide an auditable record of the distribution offunds.

The accounts management module may be further configured to prioritizethe list of instructions according to the one or more contractualagreements such that the distribution of funds is executed according tothe prioritization. The list of instructions may include amounts due toone or more of the entities; cash reserve amounts to be maintained inone or more reserve accounts; and escrow amounts to be maintained in oneor more escrow accounts.

In another aspect, the present invention provides a computer system formanaging one or more loans, each used to purchase an insurance orannuity product. The computer system may include a plan administrationmodule configured to calculate the loan interest paid on each of the oneor more loans during a period, based on the data stored in one or moredata tables; and generate a report to the borrower related to each ofthe one or more loans, the report based at least in part on the data,the report including the calculation of loan interest paid,recommendations about accounting related to the loan under GAAP, and anumber of calendar days the product has been in-force during the period.The report may further include recommendations about accounting relatedto a back-to-back loan arrangement, if present.

In another aspect, the present invention provides a computer system formanaging the total risk exposure for a portfolio of loans, each used topurchase an insurance policy, the computer system characterized in thatit includes a plan administration module. The plan administration modulemay be configured to calculate a current death benefit reduction to beapplied to one of the policies, based on the data stored in one or moredata tables, the data including a current interest rate, a forecastedproduct yield, a hard minimum and maximum death benefit, a hard minimumand maximum death benefit, tax guidelines, policy requirements,surrender costs, and a past death benefit reduction already applied tothe one of the policies; provide a notice to a loan originator or otherentity, the notice including the amount of the current death benefitreduction and a date upon which it should be applied; and record thecurrent death benefit reduction in the one or more data tablesassociated with the one of the policies.

The administration module may be further configured to calculate thecurrent death benefit reduction based at least in part on the collateralfor the loan, such that the reduction provides a degree of protectionfor the collateral. The collateral may be an asset of the borrowerpledged to the loan originator as collateral for the loan.

These and other objects are accomplished by the present invention andwill become apparent from the following detailed description of apreferred embodiment in conjunction with the accompanying drawings inwhich like numerals designate like elements.

BRIEF DESCRIPTION OF THE DRAWING

The invention may be more readily understood by reference to thefollowing description, taken with the accompanying drawing figures, inwhich:

FIG. 1 is a diagram showing several modules and data tables of acomputer system, according to one embodiment of the present invention.

FIG. 2 is a diagram showing several modules of a plan management module,according to one embodiment of the present invention.

FIG. 3 is a diagram showing a plurality of data tables, according to oneembodiment of the present invention.

FIG. 4 is a diagram showing an accounts management module linked to aplurality of accounts, according to one embodiment of the presentinvention.

FIG. 5 is a diagram showing a sales module including several tools,according to one embodiment of the present invention.

FIG. 6 is a diagram of a financial plan, according to one embodiment ofthe present invention.

FIG. 7 is a diagram of a financial plan with securitization, accordingto one embodiment of the present invention.

FIG. 8 is a graph illustrating the difference in value between the totalpremium outlay for a policy and its net cash value, and the differencein value between the total premium outlay and the accumulated value,according to one embodiment of the present invention.

FIG. 9 is an illustration of a computer, according to one embodiment ofthe present invention.

FIG. 10 is an illustration of a distributed server-client network,according to one embodiment of the present invention.

DETAILED DESCRIPTION

Certain illustrative and exemplary apparatuses, systems, and methods aredescribed herein in connection with the following description and theaccompanying drawing figures. The examples discussed represent only afew of the various ways of applying the principles supporting thematerial disclosed and, thus, the examples are intended to includeequivalents. Other advantages and novel features may become apparentfrom the detailed description which follows, when considered inconjunction with the drawing figures, in which like numerals indicatelike elements throughout the several views.

DEFINITIONS

As used in this application, the term “computer component” refers to acomputer-related entity, such as hardware, firmware, software, acombination thereof, or software in execution. For example, a computercomponent can be, but is not limited to being, a process running on aprocessor, a processor itself, an object, an executable, a thread ofexecution, a program, and a computer. By way of illustration, both anapplication running on a server and the server itself can be a computercomponent. One or more computer components cans reside within a processand/or thread of execution and a computer component can be localized ona single computer and/or distributed between and among two or morecomputers.

“Computer communications,” as used herein, refers to a communicationbetween two or more computer components and can be, for example, anetwork transfer, a file transfer, an applet transfer, an Open DatabaseConnectivity (ODBC) connection, a document mail merge, an e-mail, aHyper-Text Transfer Protocol (HTTP) message, XML, a datagram, an objecttransfer, a binary large object (BLOB) transfer, and so on. A computercommunication can occur across, for example, a wireless system (e.g.,IEEE 802.11), an Ethernet system (e.g., IEEE 802.3), a token ring system(e.g., IEEE 802.5), a local area network (LAN), a wide area network(WAN), a point-to-point system, a Virtual Private Network (VPN), FrameRelay or DSL lines, a circuit switching system, a packet switchingsystem, and so on.

“Logic,” as used herein, includes but is not limited to hardware,firmware, software and/or combinations of each to perform one or morefunctions or actions. For example, based upon a desired application orneeds, logic may include a software controlled microprocessor, discretelogic such as an Application-Specific Integrated Circuit (ASIC), orother programmed logic device. Logic may also be fully embodied assoftware.

“Signal,” as used herein, includes but is not limited to one or moreelectrical or optical signals, analog or digital, one or more computerinstructions, a bit or bit stream, or the like.

“Software,” as used herein, includes but is not limited to, one or morecomputer readable and/or executable instructions that cause a computer,computer component and/or other electronic device to perform functions,actions and/or behave in a desired manner. The instructions may beembodied in various forms like routines, algorithms, modules, tools,methods, threads, and/or programs. Software may also be implemented in avariety of executable and/or loadable forms including, but not limitedto, a stand-alone program, a function call (local and/or remote), aservelet, an applet, instructions stored in a memory, part of anoperating system or browser, and the like. It is to be appreciated thatthe computer readable and/or executable instructions can be located inone computer component and/or distributed between two or morecommunicating, co-operating, and/or parallel-processing computercomponents and thus can be loaded and/or executed in serial, parallel,massively parallel, or other manners. It will be appreciated by one ofordinary skill in the art that the form of software may be dependent on,for example, requirements of a desired application, the environment inwhich it runs, and/or the desires of a designer or programmer or thelike.

An “operable connection” (or a connection by which entities are“operably connected”) is one in which signals, physical communicationflow and/or logical communication flow may be sent and/or received.Usually, an operable connection includes a physical interface, anelectrical interface, and/or a data interface, but it is to be notedthat an operable connection may consist of differing combinations ofthese or other types of connections sufficient to allow operablecontrol.

“Database,” as used herein, refers to a physical and/or logical entitythat can store data. A database, for example, may be one or more of thefollowing: a list, a table, a file, a data store, a relational database,a data table, a queue, a heap, and so on. A database may reside in onelogical and/or physical entity and/or may be distributed between two ormore logical and/or physical entities. The term database may beunderstood to include a database management system for controlling theorganization, storage, and retrieval of data housed in the database.

A “database management system” refers generally to an interface and oneor more computer software applications specifically designed to manageand manipulate the information in a database. An interface generallyrefers to a computer program designed to provide an operative connectionor interface between a user and a software application. The databasemanagement system may include a complex suite of software programs thatcontrol the organization, storage, and retrieval of data, as well as thesecurity and integrity of the database.

An interface for a database management system may provide a series ofcommands that allow a user to create, read, update, and delete the datavalues stored in the database tables. These functions (create, read,update, delete) are sometimes referred using the acronym CRUD, so aninterface with those commands may be called a CRUD interface. A databaseinterface that includes a query function may be called a CRUDQinterface.

Query language allows users to interact with a database and analyze thedata in the tables. A query is a collection of instructions used toextract a set of data from a database. Queries do not change theinformation in the tables; they merely display the information to theuser. The result of a query is sometimes called a view. One of the bestknown query languages is Structured Query Language (SQL, sometimespronounced “sequel”). SQL is one of the standard languages for databaseinteroperability. Queries are probably the most frequently used aspectof SQL, but SQL commands may also be used as a programming tool forbuilding, altering, configuring, and generally maintaining a database.

It will be appreciated that some or all of the processes and methods ofthe system involve electronic and/or software applications that may bedynamic and flexible processes so that they may be performed in othersequences different than those described herein. It will also beappreciated by one of ordinary skill in the art that elements embodiedas software may be implemented using various programming approaches suchas machine language, procedural, object oriented, and/or artificialintelligence techniques.

The processing, analyses, and/or other functions described herein mayalso be implemented by functionally equivalent circuits like a digitalsignal processor circuit, a software controlled microprocessor, or anapplication specific integrated circuit. Components implemented assoftware are not limited to any particular programming language. Rather,the description herein provides the information one skilled in the artmay use to fabricate circuits or to generate computer software and/orincorporate hardware technologies in order to perform the processing ofthe system. It will be appreciated that some or all of the functionsand/or behaviors of the present system and method may be implemented aslogic as defined above.

To the extent that the term “includes” is employed in the detaileddescription or the list of exemplary inventive concepts, it is intendedto be inclusive in a manner similar to the term “comprising” as thatterm is interpreted when employed as a transitional word in a claim.Further still, to the extent that the term “or” is employed in the listof exemplary inventive concepts (for example, A or B) it is intended tomean “A or B or both.” When the author intends to indicate “only A or Bbut not both,” the author will employ the phrase “A or B but not both.”Thus, use of the term “or” herein is the inclusive use, not theexclusive use. See Garner, A Dictionary of Modern Legal Usage 624 (2ded. 1995).

Introduction

Exemplary systems, methods, and apparatuses are now described withreference to the drawing figures, where like reference numerals are usedto refer to like elements throughout the several views. In the followingdescription, for purposes of explanation, numerous specific details areset forth in order to facilitate a thorough understanding of thesystems, methods, apparatuses, and the like. It may be evident, however,that the exemplars described may be practiced without these specificdetails. In other instances, common structures and devices are shown inblock diagram form in order to simplify the description.

Many modifications and other embodiments may come to mind to one skilledin the art who has the benefit of the teachings presented in thedescription and drawings. It should be understood, therefore, that theinvention is not be limited to the specific embodiments disclosed andthat modifications and alternative embodiments are intended to beincluded within the scope of the disclosure and the exemplary inventiveconcepts. Although specific terms may be used herein, they are used in ageneric and descriptive sense only and not for purposes of limitation.

For example, the terms “policy” or “product” as used herein should beunderstood to include a universal life insurance policy, an annuitycontract, or any other financial instrument that employs or accomplishessome form of risk transfer and has an invested portion or component thatgrows in value over time. Similarly, the term “insured” as used hereinshould be understood to include the person or entity covered by such apolicy or product, including for example the annuitant named in anannuity contract. An insured entity, for example, may be a trust createdfor the benefit of one or more designated beneficiaries.

Although the invention will be described herein in the context of acomputer system for managing a plan that involves a loan for a lifeinsurance policy or annuity product, other financial systems may bemanaged and processed in the same or similar fashion. A loan obtained byan employer and used to buy a policy or product on behalf of anemployee, donor, shareholder, or other party affiliated with theemployer may be referred to herein as a “compensation loan” because itmay act as a form of leveraged compensation. Accordingly, the borrowermay also be referred to as the employer providing the compensation loan.

Computer System

As illustrated generally in FIG. 1, one embodiment of the presentinvention includes a computer system 10. The system 10 may include aplurality of data tables 210 connected to several interconnectedmodules, including for example an education module 110, a sales module120, and a plan management module 140.

For FIG. 1 and other drawing figures illustrating computer modules,tables, tools, and the like, it should be noted that such diagrams areintended to provide order to the discussion and not for purposes oflimitation. The modules in a computer system using the invention, forexample, may be arranged in various orders, with different names,different connections, and may include any of a variety of softwaretools or routines designed to accomplish the functions described herein.

As shown in FIG. 1, the data tables 210 may include, incorporate, oraccess one or more databases or relational databases, and may alsoinclude a database management system, and an interface with querycapabilities. In one embodiment, the data tables 210 may form arelational database, where the data in each table is linked to data inother tables.

In one embodiment, the education module 110 of the present invention maybe configured to schedule and monitor the training, education, anddevelopment of persons interested in learning about the productdelivery, financial planning advantages, and overall dynamics of theplan of the present invention, primarily for the purpose of arrangingfor the sale of policies or products through the use of borrowed funds.Such trained persons are generally third-party distributors, producers,sales associates or agents, or other commissioned-based persons. Theeducation module 110 may include actual lessons and educationalmaterials provided directly to trainees through computers or over theinternet. In one embodiment, the education module 110 tracks theprogress of each trainee, from initial registration, through thetraining process, and into the development or continuing educationstage. The education module 110 may also be configured to track graduatetrainees by distribution channel to compare commitment levels, tracksuccess rates, and provide agency-based incentives and contractvalidation. The education module 110 may also be configured to providean analysis of sales results, by class, in order to compare and improveresults by tracking business production, efficiency of case submissions,profitability, and case submission history. Data gathered by theeducation module 110 may be stored in the one or more data tables 210.As with all the modules discussed in the context of the computer system,the education module 110 may be interconnected with other modules inorder to share data and information. For example, the trainee datagathered and stored by the education module 110 may be accessible to thesales module 120.

Sales Module

In one embodiment, the sales module 120 of the present invention may beconfigured to provide statistical, geographic, and historical data aboutthe sale of policies or products under the plan of the presentinvention. Data gathered by the sales module 110 may be stored in theone or more data tables 210. The sales module 120 may include aforecasting capability based on an analysis of the sales data andstatistics.

As shown in diagram form, in FIG. 5, the sales module 120 in oneembodiment may include an illustrations tool 121, an incentives tool122, a licensing compliance tool 123, and a total data portfoliomanagement tool 124, among other features. These tools or functions maybe accomplished by software components within the sales module 120 oranywhere in the computer system 10 of the present invention. Anillustrations tool 121 may be configured to generate examples of how aninvestment in a policy or product of the present invention may performover time. The illustrations tool 121 may also include a comparison toother investments. In one embodiment, the sales module 120 may alsoinclude an incentives tool 122 for tracking and calculating thecommissioned bonus or other reward due when a policy or product is sold.The incentives tool 122 may be used to track the sales achieved during aparticular time period, such as a calendar year or, in one embodiment,during a rolling year based on the date (obtained from the educationmodule 110) when a sales associate completed a training class. Theincentives tool 122 may include the capacity to generate a variety ofreports, using data gathered by and through different modules of thecomputer system and stored in the data tables 210. The payment of bonusrewards and incentives may be initiated and distributed by theincentives tool 122.

In one embodiment, the sales module 120 may also include a licensingcompliance tool 123, as shown in FIG. 5. The data tables 210, in oneembodiment, may include the state insurance license status for eachsales associate and each sales agency or company involved in the sale ofpolicies or products. In one embodiment, the licensing compliance tool123 may produce an alert when a new loan application is filed (or isabout to be filed) and the sales agency or any of its sales associatesis not currently and properly licensed in the state where the loanapplication originated. The licensing compliance tool 123, in oneembodiment, may attach the alert to the application until it isresolved, and may execute other steps such as sending one or morenotices to the parties involved about the licensing deficiency. In oneembodiment, the licensing compliance tool 123 may store licensingrenewal dates in the data tables 210 for each sales agency and each ofits internal sales agents.

In one embodiment, the sales module 120 may also be configured to remindsales associates or agencies to re-visit a borrower, either periodicallyor in response to updated financial data received regularly bycustomers, during the term of the loan. Changes in financial status, aswell as the passage of time or the occurrence of policy milestones, mayrepresent a potential opportunity for additional business from thecustomer. In this aspect, the sales module 120 may be configured to helpthe sales force focus on new business opportunities.

The sales module 120, in one embodiment, may also include a total dataportfolio management tool 124 for collecting, collating, anddistributing data between and among the various participants in thesystem and plan of the present invention. The total data portfoliomanagement tool 124 may perform a data gathering or data mining functionin order to perform data analysis and disseminate the results to certainparticipants according to the myriad and overlapping relationshipsbetween the marketplace, the policies and products, the distributors,the loan portfolio, and the available capital. The data gathered may beanalyzed and the results disseminated to assist in decision-making withregard to sales, distribution, lending capital, and loan portfoliomanagement. At the level of the insurer or carrier, the data results maybe used in operations and to support and inform the infrastructuralrequirements of the carrier for both current and future business needs.

The total data portfolio management tool 124 may be used to collect,collate, and disseminate both un-processed and processed data using thecomputer system 10 of the present invention. As sellers and distributorsof the plan begin to market the policies and products, they will becomeuniquely qualified and positioned to collect and forward real-timemarket intelligence about activities and events taking place at thepoint of sale. As point-of-sale information is gathered, the total dataportfolio management tool 124 may categorize the data as objective orsubjective intelligence. Objective intelligence may reflect the marketcondition, program or product-specific objections and opportunities,while subject intelligence may reflect sales-related phraseology andattitudes demonstrated by prospective buyers at the point of sale. Asthese and other forms of information are gathered and recorded byoperational or sales support personnel, the information may be processedby the total data portfolio management tool 124 and stored in the one ormore data tables 210 for storage and later review and analysis.

As information is scrutinized and processed by the total data portfoliomanagement tool 124, it may be automatically distributed to sales andmarketing analysts for incorporation into updated business strategies,materials, and techniques. The information may also be automaticallydistributed via the computer system 10 to operational decision makers sothey can begin to plan for needed support. Information may bedistributed by any number of methods, including but not limited toclassroom instruction, electronic media, databases, and web-based and/orintranet-based methods and tools—all generated and distributed by thecomputer system 10 of the present invention.

The total data portfolio management tool 124 may be configured toprovide analysis tools and information to both the front-end managementand the back-end technical and administrative support, in order tomaximize the usage of all aspects of the present invention which may beuseful in delivering loans and their associated policies, products, andservices to market. For example, as various objective and subjectiveintelligence is recorded and analyzed, the results may reside in one ormore data tables 210 or system modules associated with all levels of thebusiness. As these data are provided for market and trend analyses, thecorresponding capital resources, lending capital, personnel, and otherinfrastructure may be planned for and reserved in order to enable andpreserve efficiency.

As trends reflect more or less robust levels of business volume, thepredictive capacity of the total data portfolio management tool 124 maybe used to provide statistical analysis as well as the correspondinglogical decision-sets designed to expand or contract the internal andexternal resources necessary to better manage the business, based uponvariable cost modeling. Other data representing decisions and planningfor both internal and external use may be utilized to record and analyzethe sales cycles within indigenous markets, demographics, aggregated andnon-identifiable prospecting profiles, product selections, portfoliotrending among the lender and product providers, and the market mix ofproducts.

Additional information and predictive sales-related tools may begenerated as part of the total data portfolio management tool 124,including case studies, market studies, product studies, profiles of newcarrier opportunities and their portfolio mix strength, and thepotential licensing of technology, information, know-how, and expertiseto third-party users such as rating agencies, carriers, and third-partyadministrators, loan servicers, and collateral agents.

The data gathered and analyzed by the total data portfolio managementtool 124 may be utilized to alter the interest rates and the commissionsmodels for particular loans, policies or products, or for particularcarriers. The tool 124 may also be utilized in selecting the mosteffective carrier or insurer, based on the needs of a particularborrower or insured. Moreover, the tool 124 may be used in recommendingthe policy or product best suited to the needs of the borrower, theinsured, the carrier, or other participating entities.

In one embodiment, the system 10 of the present invention may beconfigured to utilize the total data portfolio management tool 124 toassist in analyzing carrier policy flow and in forecasting capital needsfor reserves, subordination, and warehouse lending. The tool 124 mayassist with matching the in-flow of business to the appropriate capitallending mechanism and to effectuate more predictable securitizationprograms and achieve portfolio quality adjustments over time.

Plan Management Module

A technical solution to the technical problems discussed in thebackground is provided generally by the computer system 10 of thepresent invention and, more specifically, by the plan management module140. As described below, the plan management module 140 of the presentinvention may be used to continually monitor and calculate the unsecuredcurrent gap value of a single policy or product, or a group of policiesor products. The monitoring and administrative capabilities of the planmanagement module 140 may be utilized for a portfolio of policies orproducts, in order to facilitate the financing, securitization, andcredit default swap objectives of the present invention, as describedbelow.

As shown in FIG. 2, the plan management module 140 of the presentinvention may include a gap enhancement module 150, a finance module180, an accounts management module 160, an online case management module190, a plan administration module 145, and a credit default swap module800. Each module of the system 10, as illustrated in FIG. 1, may beoperably connected to the data tables 210. The tools and functions ofeach module, as described herein, may in practice be accomplished by anyof the modules, or by more than one. The modules and tools are groupedtogether to provide order to the discussion and not for purposes oflimitation.

As shown in diagram form, in FIG. 2, the gap enhancement module 150 inone embodiment may include a cash value tool 151 and a compare tool 152,among other features. The accounts management module 160 may includeaccess to any of a variety of accounts 170 as established by the plan ofthe present invention. The online case management module 190 may includea compliance tool 191, among other features. These tools or functionsmay be accomplished by software components within the plan managementmodule 120 generally or anywhere else in the computer system 10 of thepresent invention.

Each module within the plan management module 140 will be discussed ingreater detail below.

Data Tables

As shown in FIG. 3, the data tables 210 of the computer system 10 of thepresent invention may include, incorporate, or access one or moredatabases or relational databases, and may also include a databasemanagement system, and an interface with query capabilities. In oneembodiment, the data tables 210 may form a relational database, witheach table having one or more key fields used to link the data together.Other constructs and configurations linking data tables are possible andmay be desirable.

In one embodiment, the data tables 210 may include a product table 220,a cash value table 225, an insured table 230, a borrower table 235, acarrier/insurer table 240, a payments table 245, a commissions table250, and an underwriting table 255. Each data table may include avariety of data, depending on the needs of a particular system. The setof data tables 210 illustrated in FIG. 3 is not intended to beexhaustive or comprehensive for all systems.

The product table 220 may include data about each insurance policy orannuity product. The product table 220 may include a variety of data,from simple information like brand name of a policy, to more complexdata such as specific formulas contained in the contractual terms of thepolicy. Such policy terms may include, for example, a guaranteed minimumor maximum return, or relational rates keyed to one or more indices suchas the Federal Reserve funds rate, the London Interbank Offered Rate(LIBOR), or the prime lending rate. The product table 220, for example,may include a schedule of surrender charges, growth assumptions, marketvalue adjustments, crediting rates, underlying portfolio data, carrierdefault risk data based on rating from the major agencies, and any of avariety of information relevant to the policy or product. The producttable 220 may be configured to acquire and receive updated informationabout the product automatically. For example the product table 220 maybe configured to receive updated carrier default risk data from thevarious rating agencies on a periodic or episodic basis. The producttable 220 may be configured to receive updates directly from the carrieror insurer about changes in the product. In general, the product table220 is configured to receive and store current data about each productor policy.

The cash value table 225 may include data about the value of each policyor product in the plan of the present invention. As discussed hereinwith respect to the gap enhancement module 150, there are a variety offigures and data affecting the current cash value of a policy orproduct. The cash value table 225 of the present invention provides adatabase for housing any data related to the calculation and analysis ofthe cash value of a policy or product.

The insured table 230 may include data about each person named as aninsured for each product or policy. The named insured may be a person oran entity, such as a trust with one or more designated beneficiaries.Various data and relevant information about each insured may be storedin the insured data table 230. When the insured is an entity, forexample, information regarding the corporate status of the entity may bestored and monitored for its effect on the collateral assignments which,for instance, may be materially altered in the context of a bankruptcyfiling by the entity. Also, to the extent the designated beneficiary isa trust, the insured table 230 may include information about the trust,the beneficiaries, the trustee(s), attorney contact information, trustproperty data, and other relevant data to facilitate efficient planadministration and interaction with the other modules, tables, tools,and features of the computer system 10 of the present invention.

The borrower table 235 may include data about each person or entityborrowing funds related to any product or policy. For example, aborrower may obtain a premium loan and use the proceeds to purchase apolicy or product. In one embodiment of the present invention, theborrower may be an employer of the insured person and the loan may bereferred to as a compensation loan. The borrower/employer may be makingpayments on the loan over a number of years. The borrower may or may notbe the same person or entity as the named insured. In any scenario, theborrower table 235 may be configured to receive and store data abouteach borrower, such as the tax identification number, tax return data,profit and loss data, credit scoring, contact addresses, informationabout each principal member of a corporate borrower, and other detailsabout the borrower.

The carrier/insurer table 240 may include data about each insurancecarrier or organization acting as an insurer for each product or policy.Carrier data stored in the carrier table 240 may include basic contactinformation and other relevant data about the carrier, including thecredit rating of each carrier, the value and extent of various creditrisks associated with each carrier.

The payments table 245 may include data about the payments made andreceived toward the balance of a premium loan or compensation loan, asdescribed above. The payments table 245 may be referred to herein as theACH payments table 245 because it may include data about payments madethrough the Automated Clearing House (ACH) network, an electronic fundstransfer system. Data stored in the ACH payments table 245 may beaccessed and retrieved by the accounts management module 160 as part ofits function of allocating and distributing payments.

The commissions table 250 may include data about the structure of thecommissions paid by a carrier or insurer when a policy or product issold. Commission structures vary widely among different carriers, anddifferent products or policies. Also, commissions are often paid atdifferent times during the life or term of a policy. For example, aninitial commission may be paid when a policy is sold, with additionalcommissions paid on a quarterly or annual basis, and subsequentcommissions paid when additional premium deposits are made into thepolicy. Because the commissions paid may have a significant affect onthe value of the policy at different times, the commissions table 250may be used to store important data about the commission structure ofvarious policies and when commissions are paid during the term of anactive policy or product. The commissions table 250 may be used to trackspecial commission arrangements such as a levelized compensation planwhich is sometimes used to manage or reduce the Part One gap, describedmore fully below. Tracking special arrangements and alterations in thecommissions table 250 enables the system 10 of the present invention tocoordinate and collect commission payments due from carriers accordingto the current commission schedule.

The underwriting table 255 may include data about an applicant orborrower who is applying for a premium loan or compensation loan. In oneembodiment, the borrower may be considering a loan for the purchase of apolicy or product for one or more of its employees for one or more ofthe following reasons: as leveraged compensation, as a wealth-creationtool for the employee, as an asset protection mechanism for theborrower's asset, as an estate planning device, as part of an ownershiptransition, as a disciplined savings technique, as a buy/sell fundingmethod, as a reward for employee productivity and loyalty, as anemployee retention tool, as educational funding, and as a non-qualifiedbenefit offering. The underwriting table 255 may also be utilized when aborrower may be applying for a loan against the value of a policy orproduct. Whether the system 10 is facilitating the analysis of a singleloan in the application stage, a loan application undergoingunderwriting consideration by a loan originator, a loan being evaluatedas part of a current closed loan portfolio, or a loan maintained througha loan portfolio or block of loans sold into the public capital marketsvia securitization, the underwriting table 255 may be used to storeimportant information about the creditworthiness of the applicant orborrower. In addition, data captured and stored in the underwritingtable 255 may be used through the system 10 of the present invention forthe generation of loan documents, plan administration documents andreports, credit risk assessment functions, and various steps in thefinancing process such as the VFN program and the securitizationprocess, as described below.

Gap Enhancement Module

When a premium loan or compensation loan is used to purchase a lifeinsurance policy or annuity product, the value of the policy or productitself provides a basic level of collateral security for the loan.Usually, however, there is a gap between the value of the policy and theamount of premium paid, especially at the beginning of the life of thepolicy. The gap amount changes over time, depending on a variety ofvariable factors.

The gap amount often has a direct effect on the pricing and other termsof a premium loan or compensation loan and, thus, the gap amount affectsthe desire and willingness of a borrower, a carrier, a loan originator,or other parties to participate in a leveraged-compensation loanprogram. The gap amount also affects the lender's default exposure andthe carrier's ability to place competitively-priced policies orproducts. In one aspect, the present invention may be utilized tomanipulate, adjust, and otherwise manage the gap amount in order toinfluence the behavior and decisions of participating entities and tooptimize the financial performance and overall results produced by apremium loan or compensation loan, or a portfolio of such loans.

A technical problem exists in the field of premium loans because of theneed to identify and evaluate one or more assets or financialinstruments that could be used to reduce the gap amount. Placing a valueon an asset, and evaluating when and to what extent it may serve ascollateral security for a premium loan with a changing gap amount is atechnical challenge. Also, the identification and comparison of one ormore financial instruments that may be used to achieve more favorablefinancing terms is a complex technical challenge because of changinginterest rates and other variables in the financial markets, especiallywhen multiple loans with different gap amounts are managed as a group. Atechnical solution to this problem is provided generally by the computersystem 10 of the present invention and, more specifically, by the gapenhancement module 150 which may be used to continually monitor andcalculate the unsecured current gap value of a single policy or product,or a group of products. The technical effects of this solution includethe reduction in the unsecured gap amount, the addition of an assetpledged to secure a loan, the change in status of a generally dormantasset to one that is active and useful, and the improvedcreditworthiness of a loan for a policy or product protected by thesystem 10 and gap enhancement module ISO of the present invention.

As illustrated graphically in FIG. 8, there is often a gap 91 betweenthe net cash value 84 and the total premium outlay 80 for a policy orproduct. Similarly, there is often a gap 92 between the accumulatedvalue 82 and the total premium outlay 80. These gaps 91, 92 may bereferred to herein as the “part one” gap 91 and the “part two” gap 92.The two gaps 91, 92 combined may be referred to herein as the total gapor the current gap value.

The part one gap 91 exists, in part, because of the actuarial evaluationof the risk that a policy will be surrendered early. When an individualowns a policy or product without any obligations or contractuallimitations, the individual insured may decide to cancel the policy inorder to obtain the net cash value for another use. The risk ofcancellation may also be affected the individual's ability orwillingness to continue paying the premium, the occurrence of variouslife events, and other factors typically factored into an actuarial riskmodel.

The chance of surrender may be reduced if the contractual obligationsare increased to make surrender more expensive. Alternatively, theinvention may analyze and calculate an incentive such as a surrenderbonus in order to encourage the surrender or the lapse of the policy orproduct. All insurance carriers include in their actuarial models apercentage of policies expected to be surrendered early; in other words,before the death benefit is paid, for example. In one embodiment, theinvention may be configured to analyze and calculate the amount ofincentives that can predictably alter the forecasted surrender rates,thus resulting in a higher number of surrendered policies. The surrenderincentive mechanism and calculation model of the present inventionsatisfies the need in the field of insurance to make the surrender ratemore predictable and, thus, more accurate from an actuarial perspective.

The risk of surrender for a policy within the plan of the presentinvention, however, is quite different. An example plan 15 is shown inFIG. 6. In fact, the risk of surrender is significantly lower for apolicy in the plan 15 because the policy may only be surrendered upon adefault of the premium loan or compensation loan 40 by the borrower 200.Within the plan 15, the borrower 200 may be obligated to repay the loan40 by a promissory note 34 and by a UCC-1 statement 60 evidencing thepledge of an asset 70 as collateral. Moreover, the insured 100 in theplan 15 may not be completely free to surrender or cancel the policy andobtain the cash value 84 because of the collateral assignment 32executed in favor of the loan originator 300. The insured 100 may alsobe constrained by a compensation agreement 30 between the insured 100and the borrower 200 in cases where the borrower 200 is also theinsured's employer. Because of these contractual limitations on theinsured's ability to execute a surrender and the collateral securityprovided by the employer's pledged asset 70, the risk of surrender inthe context of the plan 15 is much lower.

The part one gap 91 is generally the result of surrender charges imposedfor early surrender, contingent deferred fees, market value adjustments,and the like, all of which may be imposed by a carrier in order torecover the costs associated with writing the policy or product, and theexpected profits lost, in the event of an early or premature surrender.Over time, these surrender charges and fees tend to decline until apoint in the life cycle of the policy or product where the accumulatedvalue 82 becomes equal to or greater than the net cash value, at whichpoint the part one gap 91 reaches zero. The amount of the part one gap91, relative to the premium outlay 80, will vary over time, asadditional policy premium is paid, the surrender charges and fees becomeless necessary and lower, and the accumulated value 82 of the policyincreases.

The part two gap 92 exists, in the context of a universal life insurancepolicy or an annuity product, because the amount of premium paid ordeposited (the total premium outlay 80) is generally reduced by salesloads, fees, premium taxes, miscellaneous charges, and insurance costs.These costs, however, are generally offset by the growth in theproduct's cash value resulting from the product's crediting rate ormarket participation. If the compound growth of the cash value exceedsthe aforementioned costs, the accumulated value 82 will increase duringthe active term of the policy. The amount part two gap 92, relative tothe premium outlay 80, will vary over time, as additional policy premiumis paid, and as the accumulated value 82 grows or declines.

As shown in FIG. 2, the gap enhancement module 150 in one embodiment mayinclude a cash value tool 151 and a compare tool 152, among otherfeatures. In general, the gap enhancement module 150 may be configuredto calculate the part one gap 91 and the part two gap 92, at any timeduring the life of the policy or product, based upon data stored in theone or more data tables 210.

Knowing the value of the gaps 91, 92 at particular times provides a userwith a measure of the level of risk associated with the policy, and ofthe default exposure associated with the loan used to buy the policy.For example, on day one of the term of the policy, the gaps 91, 92 maybe substantial because the policy may have a low accumulated value 82relative to the total premium outlay 80, and it may have a low net cashvalue 84 because of the high initial surrender charges and fees. The netcash value 84 may, in some circumstances, be higher than the accumulatedvalue 82 during the early years of the policy because of the presence ofcertain surrender charge enhancements or adjustments designed to enhancea policy for corporate or lending applications. Such enhancements oradjustments typically disappear over time and are used to facilitatefinancing and/or the efficient entry and exit of participating employeesin corporate insurance plans. The net cash value 84, however, isgenerally lower than the accumulated value 82, thus producing the partone gap 91. As the policy remains active and in force over time, thesurrender charges decline, the cash value 84 increases, and theinvestment gains (net of costs) produce increases in the accumulatedvalue 82 over time, the gaps 91, 92 may decrease. The accumulated value82 may increase or decrease, depending on the relationship between theperformance of the carrier's investments and the costs and chargesassociated with maintaining a particular policy or product. If allowedunder applicable agreements, the cash value 84 may decrease if thepolicy holder borrows cash from the policy or makes a cash withdrawal,which may be restricted under the plan of the present invention. Variousother events during the life of the policy will have an effect on thevalue of the gaps 91, 92.

Operation of the Gap Enhancement Module

The gap enhancement module 150 of the present invention may beconfigured to calculate the gaps 91, 92 at various times and, thus,monitor the status of one or more policies or products. The two gaps 91,92 combined may be referred to herein as the current gap value.

In one exemplary embodiment, the gap enhancement module 150 may includea computer program module that is executable by a central processingunit in a computer such as the one illustrated in FIG. 9. The gapenhancement module 150 may include programming instructions or may beotherwise configured to access and retrieve data about a policy orproduct which is stored in one or more data tables 210.

The gap enhancement module 150 may be configured to retrieve datareflecting the current amount at risk, including generally the totalpremium outlay 80 to date. The module 150 may also be configured toretrieve data about the current value of the product. The gapenhancement module 150, in one embodiment, includes a cash value tool151 to calculate the current value of the policy or product based, atleast in part, on (1) the current net cash value 84 of the product, (2)the current accumulated value 82 of the product, and (3) the currentcollateral value of the one or more instruments providing collateralsecurity for the underlying loan. The gap enhancement module 150 mayalso assess the current gap value based on current assumptions,guaranteed assumptions, and/or at varying interest rates. The cash valuetool 151, in one embodiment, may be configured to acquire updated datadirectly from the insurer or carrier about one or more of the abovefactors affecting the current value. For example, the cash value tool151 may be configured to send a query to the carrier requesting thecurrent net cash value 82 if the policy or product were surrenderedtoday (net of charges and fees), and to receive the data in response,and store in the one or more data tables 210. The cash value tool 151may be configured to regularly request and obtain updated policy datadirectly from the carrier.

Using the data retrieved from the data tables 210, the gap enhancementmodule 150 may be configured to calculate the current gap value for eachpolicy or product. The current gap value generally represents thedifference between the total premium outlay 80 and the current cashvalue of the policy or product.

The gap enhancement module 150 may be configured to display or otherwisereport the current gap value to a user. The current gap value may beuseful in assessing the current status of an insurance policy orproduct, a group of policies or products, or an entire portfolio ofpolicies or products. As described herein, the current gap value of apolicy or product may be reduced or otherwise secured by using one ormore financial or contractual gap enhancement instruments. If thecurrent gap value is too large, the user may need to identify and obtainadditional collateral security for the policy or product. Whether thecurrent gap value is too large depends upon the policy, the user, theloans or other obligations involved, and other parameters related to aparticular financial plan or system.

In one embodiment, the gap enhancement module 150 may be configured tocompare the current gap value to a limit. The limit may be predeterminedor set by the user. The limit may be expressed as a specific dollaramount, as a ratio of selected values related to the policy, as apercentage of the premium outlay 80, or in any other way the user of thegap enhancement module 150 may select. For example, the limit may be setat eighty percent of the premium outlay 80, so that as additionalpremium is paid or deposited, the dollar value of the limit changes. Inthis example, if the gap enhancement amounts to twenty percent of thepremium outlay 80, then the minimum limit (set at eighty percent) wouldbe satisfied, and no additional gap enhancement would be requested.

If the current gap value is greater than the limit, the gap enhancementmodule 150 may be configured to identify one or more financial orcontractual instruments that offer additional collateral security forthe insurance policy or product. These may be referred to as gapenhancement instruments, because when in place they enhance the gap byreducing the gap value and thereby minimizing the default exposure. Theavailable gap enhancement instruments may include a rider on the policy,a change in the commission structure, a loan agreement, a contractprovision, or other kinds of contractual obligations between and amongany of the parties with an interest in reducing the current gap value.The various gap enhancement instruments are described in greater detailbelow, in the next section. In one embodiment, the gap enhancementmodule 150 identifies the instruments that are available if and when thecurrent gap value exceeds the limit.

It is important to note that one or more of the gap enhancementinstruments may already be in place. These active instruments may beidentified and evaluated by the cash value tool 151 (described above)when it calculates the current value of the policy or product. Thecurrent value is based, in part, on the current collateral value of theone or more instruments providing collateral security for the underlyingloan. Because they provide collateral security, these are gapenhancement instruments. In this aspect, the cash value tool 151 of thepresent invention, in one embodiment, takes into consideration those gapenhancement instruments that may be already in place for a policy orproduct.

If the gap enhancement module 150 determines that the current gap valueexceeds the limit, and that additional gap enhancement instruments maybe needed, the gap enhancement module 150 may include a compare tool152. The compare tool 152 may be configured to perform comparativefunctions among various financial and contractual gap enhancementinstruments. The compare tool 152 may be configured to compare theavailable instruments based on a set of parameters. The parameters mayinclude the relative value of each available instrument, the net cost ofexecuting each instrument, the ease of obtaining each instrument fromthe party offering it, or any other factor that may be useful in makinga comparison. The compare tool 152 may be configured to present a listof the available instruments to a user, along with the comparisonparameters or other information about each available instrument. Thecompare tool 152 may be further configured to receive an indication bythe user of the instrument selected. The user may select one or moreinstruments. Alternatively, the compare tool 152 may be programmed toautomatically select one or more instruments according to a built-inpriority or preference assigned to each instrument. Each selectedinstrument may have a variety of tasks, documents, deadlines, and otherassociated requirements.

The gap enhancement module 150, in one embodiment, may be configured toinitiate the process of executing the selected instrument by, forexample, generating one or more documents. If, for example, the selectedinstrument is a policy rider, the gap enhancement module 150 of thepresent invention may generate a proposed draft of the rider to bepresented to the insurer for review, approval, and filing. The gapenhancement module 150 may also generate a timeline or schedule withdeadlines for the user to follow, so the selected instrument progressestoward execution in an efficient manner. In this way, the gapenhancement module 150 may monitor the execution process for eachselected instrument. By initiating and monitoring the process, the gapenhancement module 150 may facilitate the execution of the one or moreselected instruments.

When a selected instrument has been executed or otherwise completed, itwill affect the current gap value and, perhaps, other values related toa policy or product. The gap enhancement module 150, in one embodiment,may be configured to update the current collateral value to reflect theexpected effect of the new gap enhancement instrument selected. Byupdating the current collateral value, the gap enhancement module 150helps keep the data current so that it accurately reflects the presentvalue and status of the policies or products being monitored.

Gap Enhancement Instruments

As discussed generally above, various gap enhancement instruments areavailable as part of the system 10 and plan 15 of the present invention.The gap enhancement instruments represent an important advance in theart and one of the many advantageous features of the present invention.

The available gap enhancement instruments may include a rider on thepolicy or product. For example, a rider executed by the carrier orinsurer waiving certain fees, such as the surrender charges, would havethe effect of increasing the net cash value 84 and reducing the part onegap 91. Within an example plan 15, as shown in FIG. 6, a collateralassignment 32 may be in effect which generally pledges the cash value ofthe policy to the lender or loan originator. Accordingly, a rider mayprimarily benefit the loan originator 300 and therefore may notsignificantly alter the actuarial model as it applies to the insured100. The waiver of surrender charges may be called a honeymoon riderbecause it is usually temporary. A rider may expire when the gapdeclines to a certain level or to zero. A rider may expire after acertain number of years, after a certain policy milestone, or upon theoccurrence of some other event.

The available gap enhancement instruments may also include an agreementto change the commission structure for the policy or product. Salescommissions are often taken or credited at the beginning of the life ofa policy, thereby contributing to the gap immediately. One way to reducethe gap is by postponing a portion of the commissions, or by leveling orextending the payment of commissions over a number of years, in order tolessen the gap-increasing effect of sales commissions. Vesting andcharge-back periods can be adjusted accordingly. By altering commissionschedules, the actuarial cost structures can be managed at the carrierlevel, thereby providing a gap enhancement. Such alterations may betracked, for example, in the commission table 250.

The available gap enhancement instruments may also include the depositof sufficient funds in a special reserve account, to pay a portion ofthe gap in the event of a surrender event or a default on the loan. Bystructuring a reserve account, the early cash value may be increased.The reserve obligation may be part of a contract provision. Having thefunds in reserve to immediately cover the gap reduces the effect of thesurrender risk on the policy, and the default exposure on the loan.Moreover, when multiple polices or products are involved, the specialreserve account may include funds to cover only some of the policies(not all of them) because a surrender event or default on all thepolicies simultaneously is unlikely. The contract provisions, forexample, may be drafted so that sufficient reserves are maintained for acertain portion or percentage of the policies provided by a particularcarrier.

In one contract provision requiring reserves, for example, the contractmay include a commitment by the carrier to place in a reserve account anamount of funds roughly equal to the expected gap value. The funds inreserve may represent the amount of the sales commission earned by asales agent, or the amount of the marketing allowance or other feeearned by the loan servicer or loan originator. The marketing allowancemay include funds paid outside of commissions, solely at the carrier'sdiscretion, to cover the costs associated with marketing the policy orproduct. The marketing allowance is frequently based on productionvolume. Accordingly, the contract provision may also include acommitment by the sales agent or the loan originator to leave the fundsin reserve until the current gap value is reduced by other factors,after which time the funds may be withdrawn.

The funds in reserve may also represent production bonuses (based onsales volume), persistency bonuses (based on the longevity of a policyor product in the carrier portfolio), commission holdbacks (commissionsspread over a period of years), convention credits (for conventions ortrip attendance), or other compensation structures or amounts held fromthe sales agent or producer. Reserves can later be adjusted and fundsreturned based upon the actual surrender and default experience, versusthe projected experience used to set the target reserve values.

The available gap enhancement instruments may also include a loanagreement pledging to pay a portion of the gap value in the event of asurrender event. Such a loan arrangement may be made between a loanservicer or the loan originator, for example, and the carrier orinsurer, in an amount sufficient to cover all or a portion of the gap.The terms and provisions of such a loan may provide that: (a) theinsurer will pay the total gap amount in the event of a default on theloan by the borrower, and (b) the loan servicer or originator would thenhave a repayment obligation to the insurer in the same amount. In thecontext of the plan 15 of the present invention, as shown in FIG. 6, inone embodiment, this re-payment obligation of the insurer would beultimately secured by the employer's pledged asset 70 and by a right ofset-off of any commissions earned by the loan servicer 310 or originator300 in favor of the insurer 320. For a plan 15 that includes multiplepolicies and products 20, the loan terms may include commissions earnedwith respect to all the lender-funded policies 20 written by aparticular insurer 320 (as opposed to the single surrendered policy ordefaulted loan). In this aspect, the ongoing relationship between theloan servicer 310 or originator 300 and one or more participatinginsurers 320 may be leveraged to provide additional collateral securityfor any of a number of active policies 20 in the plan 15.

The available gap enhancement instruments may also include a combinationof features. As described above, a rider executed by the carrier mayinclude a waiver of certain surrender fees and charges. A rider thatincludes a waiver of surrender charges in favor of the lender or loanoriginator, however, may not extend to the borrower. Although the lenderwould be made whole, the obligation for the surrender charges may beborne by the borrower in the event of a loan call or default. Passingthe surrender charges on to the defaulting borrower may achieved througha series of agreements between the carrier, the commissioned salesentity, and the lender, as illustrated in the following example:

An insurance contract is purchased in two (2) equal payments of $200,000to the carrier. In the second contract year, a default or loan calloccurs, and the cash surrender value of the contract is $320,000. Uponthis occurrence, the insurance contract is surrendered and the sum ofthe $320,000 is returned to the lender in accordance with the collateralassignment. The carrier immediately advances $80,000 to the commissionedsales entity; however, the sum is paid directly to the lender. Thelender subsequently repays its $400,000 obligation to its fundingsource, and simultaneously assigns the remaining borrower's obligation(in the amount of $320,000) to the commission sales entity. Thecommission sales entity collects from the borrower, either from itspledged asset or otherwise, and then repays the carrier out of theproceeds obtained from the borrower, or in the alternative, out of theproceeds of future commissions.

Influencing Surrender Rates to Optimize the Plan

The computer system 10 of the present invention represents a technicalsolution to the technical problems discussed in the background,including, for example, the gap enhancement module 150 of the computersystem 10 which, in one embodiment, may be used to influence thesurrender risk related to a policy or product. In addition, the gapenhancement module 150 of the present invention has the technical effectof changing the actual surrender rate, adjusting the actuarialevaluation of the surrender risk, affecting the premium charged for aparticular policy or product, and changing the terms and provisions of aloan obtained to pay the premium.

Early Surrender: The gap enhancement module 150 of the present inventionhas been discussed in terms of its configuration for analyzing the gaps91, 92 and evaluating the possible gap enhancement instrumentsavailable, in order to reduce the current gap value. A policy rider, forexample, is a gap enhancement instrument wherein the carrier waivescertain surrender charges, which has the effect of increasing the netcash value 84 and reducing the part one gap 91. Such a rider, however,also has the effect of making a surrender less costly to the insuredand, therefore, more likely to occur during the term of the policy. Ingeneral, the lower the penalty, the higher the probability the insuredwill surrender the policy.

In one embodiment, the gap enhancement module 150 of the presentinvention may be configured to add a pre-payment penalty to a loan inorder to increase the costs associated with surrender and therebydissuade the insured from surrendering the policy. The pre-paymentpenalty may be imposed by the loan originator 300 or loan servicer 310,not by the carrier 320. Although the penalty represents a real cost tobe paid if and when a policy is surrendered, the penalty itself is notpart of the surrender charges assessed by the carrier 320 and,therefore, it generally does not increase the unsecured gap value.Accordingly, the gap enhancement instruments and other collateralsecurity remain in place to bolster the value and creditworthiness ofthe policy or product, even though the penalty is decreasing thelikelihood of an early surrender. The presence of the penalty may changethe actuarial evaluation of the risk that a policy will be surrenderedearly, but it does so without increasing the gap value.

Thus, the pre-payment penalty may be used to influence the probabilityof a surrender event. Of course, the amount of the pre-payment penaltymay vary over time, in order to influence the surrender probabilityduring various specific periods in the term of the policy. The gapenhancement module 150 may be configured to monitor a plurality ofpolicies or products over time, setting the pre-payment penalty andmonitoring the surrender frequency, and storing data in the data tables210. In one embodiment, the gap enhancement module 150 may be furtherconfigured to analyze the data, using a regression analysis for example,and based on the results provide optional pricing and actuarialassumptions for certain policies. In this aspect, the carrier may offerone or more policies that have a different benefit or a differentpremium cost, depending on the amount of a pre-payment penalty put inplace by the loan originator or servicer.

On a broader scale, in terms of the policies and entities participatingin the plan 15 of the present invention, each surrender event may havean economic effect on one or more of the various entities in the plan15, with some incurring costs and others receiving income from theevent. The gap enhancement module 150 of the present invention may beused to adjust or set the pre-payment penalty at a level that producesoptimal results for the entities in the plan 15, by influencing thenumber of policies that are surrendered early. For example, supposestandard policies with no pre-payment penalty have an average surrenderrate of five percent (5%) within the first three years. The gapenhancement module 150 and the data for the system 10 of the inventionmay determine that an average surrender rate of two percent (2%) wouldproduce improved or more optimal results for the plan 15 as a whole.Accordingly, the pre-payment penalty may be instituted or increased, todiscourage surrender, and in time help lower the rate from 5% to 2%.

Conversely, the system 10 and data may indicate that a higher surrenderrate of twenty percent (20%) would be optimal. In this scenario, thepre-payment penalty may be decreased or eliminated, in order toneutralize the effect of a penalty on the surrender decision, and intime help raise the rate from 5% to 20%. Alternatively, the pre-paymentpenalty may be replaced with a surrender bonus, in order to activelyencourage surrender, which would help raise the surrender rate from 5%to 20%. In this aspect, the pre-payment penalty or surrender bonus maybe used to influence surrender frequency, and the corresponding policypersistency, for policies or products in the plan 15.

Surrender Later in the Term: The amount of the pre-payment penalty (orthe surrender bonus) may vary over time, in order to influence thesurrender decision in the desired direction during various specificperiods in the term of the policy. For example, the insured may elect tosurrender the policy or product, or allow it to lapse, and then pay-offthe underlying loan 40. A default or other failure to pay the loan mayalso force a lapse of the policy, and the insured would then obtain thecash value of the policy less the surrender charges and prepaymentpenalties. Insurance carriers assume a certain number of policies willlapse or be surrendered, as part of their actuarial modeling. However,this modeling has historically been based on accumulated actuarialmethodology, not on the active monitoring and adjustment mechanisms likethat provided by the present invention, and the innovative gapenhancement mechanisms that the invention facilitates.

A surrender event may occur toward the end of the policy term, when theinsured may prefer to collect the cash value now and forego the deathbenefit. In some instances, paying the cash value in a surrender eventcosts the carrier less than paying the death benefit. Accordingly, inthe plan 15 of the present invention, a surrender bonus may be includedin order to actively encourage surrender. The savings to the carrier, inone embodiment, may be shared with the loan originator or other entitiesin the plan 15, according to one or more agreements between and amongthe participating entities. The entities may agree, for example, todeposit funds into a surrender reserve account for the purpose of payingsurrender bonuses.

As with the pre-payment penalty and surrender bonus described above, thegap enhancement module 150 may be configured to monitor a plurality ofpolicies or products over time, store data in the data tables 210, andcalculate an optimal surrender bonus in order to encourage a desiredsurrender rate or frequency. By adjusting the surrender bonus at varioustimes, for various products, a surrender rate that produces optimalresults for the entities and participants in the plan 15 may beachieved.

The surrender rate or frequency may affect the premium pricing andactuarial assumptions for certain policies and products. By storing andanalyzing data about policies and surrender events over time, the gapenhancement module 150 of the present invention may be configured toanalyze the data and provide results to the one or more participatingcarriers who, in turn, may provide policies or products with differentpremium costs or benefit amounts depending upon the presence and amountof a surrender bonus provided during certain periods or at milestonesduring the term of a policy.

The plan 15 of the present invention, therefore, may include one or morepenalties or bonuses to be applied to selected policies or products inorder to influence the decisions of participating insureds, in order tooptimize the financial performance and other characteristics of the plan15 as a whole. The penalty or bonus strategy may be applied to allpolicies within a loan portfolio or, alternatively, selected policieswith similar or disparate characteristics may be aggregated into aportfolio in order to achieve predictable financial results that aremore easily sold into the public capital markets. The monitoring andadministrative capabilities of the plan management module 140 may beutilized for a portfolio of policies or products, in order to facilitatethe financing, securitization, and credit default swap objectives of thepresent invention.

The computer system 10 of the present invention, including the variousmodules and tools and the data tables 210, of course, may be used togather, store, retrieve, analyze, and otherwise process current andhistorical data about the policies and products in the plan 15. In thisaspect, as the plan 15 grows and matures in the number and variety ofparticipating carriers and policies, then plan 15 and the computersystem 10 may be configured to analyze the data, produce variouspredictive models and forecasts, and establish penalties or bonuses asincentives to the participating entities such that the overallperformance of the plan 15 is enhanced.

The Finance Module Solution Analyze the Aggregate Value and Risk for aPortfolio of Loans

In one aspect, the system 10 of the present invention provides atechnical solution to the problem of analyzing and monitoring the gapamount of multiple policies, and thereby assessing the default exposurefor the underlying premium loans or compensation loans. The computersystem 10 of the present invention and, more specifically, by thefinance module 180 may be used to combine or pool a group of loans intoa portfolio, calculate an aggregate risk for the entire portfolio, andprovide these results to a credit provider in order to obtain financing.

The computer system 10 of the present invention, therefore, provides asystem and method for assessing the value, risk, default exposure, andgeneral creditworthiness of a loan portfolio, for the purpose ofevaluating the merits of the portfolio as a securitizable asset pool,for making decisions regarding credit enhancement and subordination, andfor managing the default exposure.

Grouping multiple loans together in a portfolio produces several notabletechnical effects. First, the aggregate yield of the portfolio becomesmore stabilized, resulting in a more predictable risk/return profile,which in turn results in a higher credit rating than would be assignedto any of the single loans. Also, the various risks that might affect asingle loan negatively may have relatively little impact on theportfolio as a whole. The resulting portfolio of loans has a higherdollar value and produces a diversified, hedgeable risk pool with moremanageable characteristics. For example, the overall gap value for aportfolio of loans may be enhanced and managed using techniques similarto those described above for individual loans, but to greater effect.

The system 10 may be used to display, report, analyze, hedge, or assistin hedging the total unsecured gap value of the policies in theportfolio. The pooling of loans allows the system 10 to manage the poollike a portfolio. The system 10 may be configured to monitor certainaggregate levels of the portfolio, such as monitoring the risk exposureof borrowers in a given industry, in a particular geographic region, orhaving a particular policy type, etc. Accordingly, the system 10 may beused not only to trigger the need for gap enhancement instruments forthe policies and products already in force, but it may also assist inmanaging and altering the portfolio over time so that the new policiesand products accepted will assist in achieving a desired risk profilefor the entire portfolio. As noted herein, the techniques forinfluencing surrender may be used to optimize the usefulness of theplan, such as by adding or waiving the carrier's surrender charges, byadding or waiving pre-payment penalties, or by adding or waivingsurrender bonuses. Similar techniques may be used to affect and eveneffectively create a desired credit rating for a particular loanportfolio. The present invention may be configured to analyze andprovide data on the various adjustment strategies that may be used tobolster the value and creditworthiness of a loan portfolio, thuspredictably altering the portfolio exposure in order to permit lenders,investors, and other financial intermediaries the opportunity to offeroptional pricing assumptions with respect to lending, securitizations,hedging, and other capital markets product offerings. In addition, thesystem 10 may also be configured to observe carrier ratings, policytrends, overall portfolio trends, and the like, to assist in makingdecisions about individual loan rates and terms, based on the riskprofile of the loan portfolio as a whole. For example, if a carrierrating downgrade is expected, the rates for that carrier's policyholderparticipants may be increased in anticipation of the downgrade, therebyenabling the early purchase of risk protection mechanisms.

The plan management module 140, in one embodiment, may be used toevaluate and manage the total risk exposure for a loan portfolio byensuring the appropriate reserves and subordination amounts aremaintained, while maximizing the amount of funds available foralternative uses, including outside investment. In this aspect, thecomputer system 10 has the technical effect of making funds availablefor investment that may be otherwise unavailable.

Having a large pool of loans in a portfolio, in general, creates accessto capital that would generally not be available for a single loan. Whenenhanced by collateral security and current data provided by thecomputer system 10 and modules of the present invention, having a largepool of loans not only creates access to capital but also creates accessto much more favorable rates.

At a first level, in response to the enhanced security of the underlyingloans, and the aggregate risk and yield calculated for the entire loanportfolio by the finance module 180, a credit provider may extend acredit facility for financing a loan portfolio at more favorable termsthan would otherwise be available.

At a second level, the system 10 of the present invention may be used toenhance a loan portfolio to such a high level of security that a blockof loans may be financed using variable funding notes (VFNs). Thefinance module 180, in one embodiment, may coordinate the issuance andpurchase of VFNs in order to facilitate the financing of a block ofloans enhanced by the system 10 of the present invention.

At another level, the loan purchaser who issued one or more VFNs topurchase one or more blocks of loans may transfer a block of loans in atrue sale transaction to a bankruptcy-remote special-purpose entity,thereby further enhancing the credit rating of the block of loans. Sucha transaction may be financed by an investment bank on terms generallymore favorable than the original first-level credit facility, and oftenmore favorable than the terms of the VFNs.

At yet another level, the quality and extent of the collateral securityenhancements provided by the system 10 of the present invention mayproduce assets of sufficient quality to allow the loan purchaser totransform a block of loans into an asset-backed security. Securitizationof the blocks of loans held by the loan purchaser may be accomplished,typically with the participation of an investment bank. Each block ofloans may qualify as sufficient collateral to permit the issuance ofsecurity interests, such as asset-backed commercial paper, medium-termnotes, or other instruments traded and sold into the capital markets.

In one embodiment, the finance module 180 and the overall computersystem 10 of the present invention may prompt the creation of a newmarket for trading blocks of loans, in the form of asset-backed securityinstruments. The present invention includes a trading system formanaging and controlling the buying and selling of security interests ina block of loans enhanced by the system 10 of the present invention. Inthis aspect, a trading floor generally for the loan market may becreated, monitored, and maintained as part of the system 10 of thepresent invention.

The system 10 of the present invention may also be configured to hedgeor assist in the hedging of certain concentrated risks, such as thecarrier default risk, through the derivatives marketplace forinsurance-based products. As shown in FIG. 2, the system 10 may includea credit default swap module 800, discussed more fully below.

The levels of financing made possible by the computer system 10 of thepresent invention are discussed again below, in the context of aninventive plan 15 of the present invention.

An Exemplary Plan

The system 10 of the present invention, as described, may be used in thecontext of a loan obtained and used to purchase a life insurance policyor annuity contract. For example, a policy or product may be purchasedby an employer for one or more of its employees, as a form of leveragedcompensation. The loan originator, in one embodiment, may engage inleveraged compensation transactions with individuals, corporations,charitable organizations, educational institutions, and other entities.

As described above, the system 10 of the present invention may be usedto actively monitor and enhance the collateral security for one or moreloans in order to facilitate financing, at favorable terms, andultimately to facilitate securitization. The collateral security, asdescribed above, may involve one or more gap enhancement instrumentsmanaged by the system 10 of the present invention. In one exemplaryembodiment, the present invention may include a financial structure orplan 15 as illustrated in FIGS. 6 and 7.

As shown in FIG. 6, the plan 15 of the present invention may include aninsurance product 20, such as a universal life policy or an annuityproduct. The value of the policy or product 20 may accumulate over time.A policy or product 20 in the plan 15 may grow in value, tax-free ortax-deferred, providing a compound return on the insurance or annuityproduct 20. Different products have different risk profiles, therebyaffecting the cost of funds borrowed to purchase them. The differentrisk profiles are caused in part by the additional costs incurred tohedge the credit risks for a particular carrier.

The plan 15 may include an employee or insured 100, an employer/borrower200, a loan originator 300, and a carrier or insurer 320. The plan 15may include a compensation loan 40, from the loan originator 300 to theborrower 200, for the purpose of purchasing the policy or product 20.The employee 100 may be the named insured and may be the owner of thepolicy 20. The employer 200 may use the loan proceeds to purchase apolicy 20 for or on behalf of its employee 100. The purchase may betreated as a form of compensation to the employee 100, as a loan, or asany other kind of transaction. If the loan proceeds are transferred tothe employee 100, the employee 100 may have an obligation to purchasethe policy or product 20 with the loan proceeds.

The insured 100 is receiving a benefit, perhaps as a kind ofcompensation, in the form of an insurance policy or annuity. Theemployer/borrower 200 funded this compensation through borrowing. Theplan 15 may include an employee compensation agreement 30 between theinsured employee 100 and his or her employer 200.

When the loan 40 is executed, the employer/borrower 200 may sign apromissory note 34 or other agreement to pay the loan 40. In oneembodiment, the employer 200 may make interest only payments on the loan40. The promissory note 34 provides a basic level of security for theloan 40 because it memorializes the repayment obligation of the borrower200.

The plan 15 of the present invention is different from traditionalpremium financing for several reasons. Although traditional premiumfinancing may not require personal guarantees, it generally requiresdeposit accounts or liquid assets plus the cash value of a policy orproduct. The plan 15 of the present invention may utilize one or moreassets because of the gap enhancement mechanisms described herein.Traditional premium financing does not involve any gap enhancementmechanisms. Also, under the plan 15 of the present invention, theinsured 100 owns the policy or product 20, and the increase in value,over time, will generally accrue to the insured 100. The named insured100 may be a person or an entity, such as a trust with one or moredesignated beneficiaries. The loan 40, however, was made to the employer200, not the insured 100. A personal guarantee from the insured 100 forthe loan 40 is not required, which is one factor that removes the plan15 from the realm of traditional premium financing. The fact that theloan 40 is secured by the borrower's assets and the value of the policyitself, instead of by the traditional forms of collateral (such as theinsured's deposit accounts), also removes the plan 15 from the realm oftraditional premium financing. For these reasons, in one aspect, theplan 15 of the present invention is generally not subject to theextensive regulations governing premium financing and traditionallending.

The plan 15 of the present invention, in one embodiment, represents amethod or system of securing a loan 40 for a policy or product 20. Themethod or system may include the promissory note 34, the pledged asset70, the collateral assignment 32, a compensation agreement 30, and/orany of a plurality of gap enhancement instruments.

In situations where the borrower 200 is an employer of the insured 100and the product is purchased as a form of compensation, the plan 15 ofthe present invention also represents a leveraged compensationarrangement. The inventive arrangement may include the product 20, theloan 40, the promissory note 34, the pledged asset 70, the collateralassignment 32, a compensation agreement 30, and/or any of a plurality ofgap enhancement instruments.

Forms of Collateral Security

The computer system 10 and plan 15 of the present invention represents atechnical solution to the technical problems discussed in thebackground. More specifically, the plan 15 of the present inventionincludes the identification of an asset that can be used to reduce thegap amount; specifically, the employer/borrower 200 in the plan 15 maypledge a particular asset as collateral for the loan 40, thereby addingan asset for inclusion and analysis by the computer system 10 whenaccomplishing its gap enhancement function. The plan 15 of the presentinvention solves the technical problem by identifying the asset. Thecomputer system 10 solves the technical problem, and produces a varietyof technical effects, by and through the process of valuing the asset,comparing it to the other forms of collateral security, and evaluatingwhen an instrument pledging the asset may be necessary or desired inorder to enhance the collateral security for the underlying loan 40.

In addition to the promissory note 34, the employer 200 may identify anynumber of assets 70, such as the employer's accounts receivable, work inprocess, real estate, liquid securities, equipment, inventory, propertyor any other non-cash business or personal asset to pledge as collateralsecurity for the loan 40. In one embodiment, such asset or assets 70 maybe pledged as collateral at or near the time when the loan 40 is firstobtained. The value of the collateral may be assessed by the computersystem 10 of the present invention and the value data may be stored inone or more data tables 210 for inclusion when the current collateralvalue is calculated by the system 10.

The employer 200 may authorize the filing of a UCC-1 statement 60evidencing the pledge of an asset 70 as collateral for the loan 40.Financing statements under the UCC (Uniform-Commercial Code) are statelaw devices existing in each state and are used to perfect a securityinterest in the collateral specified in a statement 60. To perfect asecurity interest is to lock-in priority over other creditors in theevent of a potential bankruptcy. The statement 60 itself does not createa security interest; the security interest may be created by acollateral assignment 52, described below. To the extent the plan 15 ofthe present invention may be put to use outside the U.S., similar legaldevices and requirements would be followed. The UCC-1 statement may befiled with the appropriate authority as a record of the pledge. Inpractice, the UCC-1 statement 60 may take the form of a lien filed bythe loan originator 300. In the event the insured 100 has a legalinterest in the pledged asset 70, the insured 100 may also allow thefiling of a separate UCC-1 statement evidencing the pledge of theinsured's interest in the asset 70.

In one embodiment, the present invention includes a method oftransforming a dormant asset into an active, working asset thatgenerates value for the borrower/employer 200 and the employees whoparticipate in the plan 15 as insureds 100. A financial asset such asthe accounts receivable or a physical asset such as a fleet or aircraft,for example, which may sit dormant and un-utilized for decades, may betransformed using the plan 15 of the present invention into a workingasset 70 when pledged as collateral for a loan 40.

In addition to the promissory note 34 and the UCC-1 statement 60, theinsured 100 may execute a collateral assignment 32 of the cash value ofthe policy 20 as collateral security for the loan 40. The collateralassignment 32 may be executed by the insured 100 in favor of the loanoriginator 300. Although the loan 40 is evidenced by the promissory note34, enhanced by the UCC-1 filing, and partially secured by thecollateral assignment 32, there may remain a difference (i.e., a gap)between the premium paid and the actual current value of the product 20at any given time. As described above, the gap remains generallyunsecured by collateral in most arrangements.

The loan 40 from the loan originator 300 to the employer 200 may be usedto purchase the insurance or annuity product 20 by paying the amount ofthe premium due, either all at once or in several installments. Payingall or most of the premium early in the life of the policy 20 providesmore cash to be invested sooner, so the value of the policy 20 increasesmore quickly than with traditional monthly premium plans.

The total premium outlay 80 may determine the amount of the deathbenefit under the policy or product 20. A higher premium outlay 80, forexample, may result in a higher death benefit. For certain policies orproducts 20, the amount of death benefit may change during the term ofthe policy, depending upon the total premium outlay 80 paid for aparticular period. Certain rules, in various jurisdictions, govern thepayments of premium and the adjustment of death benefit or face amount.In one embodiment, the system 10 of the present invention may include anonline case management module 190 and/or a compliance tool 191configured to display and monitor compliance with these rules in eachjurisdiction. The online case management module 190 may be part of theplan management module 140 as shown in FIG. 2. The compliance tool 191may be configured to track the rules in each jurisdiction and storeinformation about the steps required to satisfy the rules.

In one embodiment, the compliance tool 191 may produce an alert when anew loan application is received from a certain state, notifying andreminding the user of the rules for that jurisdiction. The compliancetool 191, in one embodiment, may attach the alert to the applicationuntil it is resolved, and may execute other steps such as sending one ormore notices to the parties involved. The online case management module190 may be configured to initiate and execute to completion certainadjustments designed to satisfy the rules in the jurisdiction, and mayinclude an analysis of the product during and after the early period. Inthis aspect, the premium outlay 80 and the terms of the product 20 arefollowed by the plan 15 on a periodic basis.

Phases of the Plan

The plan 15 of the present invention may proceed through one or moreconsecutive phases. The plan management module 140 of the system 10 maybe configured, in one embodiment, to automatically generate documentsduring various phases of the plan, such as loan applications, closingdocuments, contracts, statutory filings, letters, proposals,projections, and other documents used during the various phases. In oneembodiment, the plan 15 my include the general phases of underwriting,funding, and cash management.

Underwriting: Because the plan 15 of the present invention creates aspecific set of risks and responsibilities between and among multipleparties, the plan 15 of the present invention may include a unique setof underwriting criteria. In one embodiment, the set of underwritingcriteria includes an analysis of the cash flow of the borrower oremployer 200 and an analysis of the pledged asset 70; typically, thefirm's accounts receivable, real property, equipment, inventory, orother asset. The analysis of the cash flow of the borrower 200 may beperformed because of the gap enhancements which are put into place forall or most of the loans 40. Cash flow is one of the prevalent factorsin estimating a loan's long-term viability. The loan originator 300 mayconduct an annual review of the borrower's cash flow situation based ontax returns or other documents. Also, the loan originator 300 mayrequire an accounts receivable aging summary from the employer 200 forthe most recent calendar quarter prior to closing, for example, and theloan originator 300 may require quarterly aging summary reportsthereafter.

The loan originator 300, in one embodiment, may retain the option tocall the loan 40 if a significant decrease in the cash flow and/or valueof the pledged asset 70 (i.e., the amount of the accounts receivable)and thereby exit a deteriorating arrangement. In addition, theunderwriting criteria may include a comprehensive evaluation of theemployer's business and the client's creditworthiness. In oneembodiment, the plan 15 of the present invention may include theretrieval of a credit history for each participant, either manuallyand/or online through a secured link so the data and information may bedownloaded into the computer system 10 of the present invention. Theplan 15, in one embodiment, may also include the completion of a matrixscoring system, a client credit worksheet, automated underwriting, areview of the proposed loan closing documents, and automatednotification of certain triggering events such as missed payments, loandefault, carrier credit downgrades, and other factors affecting theoverall credit analysis.

Funding: The funding phase of the plan 15 of the present invention, inone embodiment, may include the following general tasks or stepsdescribed below. The transmission of requests may be accomplished bymail, by facsimile transmission, electronically, telephone, telex, orany other method. The funding steps may be accomplished by one or moremodules of the computer system 10 of the present invention.

Information about the participants 100, 200, 320 and the product 20 maybe collected and sent to the collateral agent 450. In one embodiment,this information may be transmitted via a secured communications link.The information transmitted may include complete, closed files,including underwriting documents, loan documents, advance requests, andother documentation needed or requested to initiate the funding.

Requests for initial and subsequent fundings may be transmitted to anyof the various sources of funds in the plan 15, including through acollateral agent 450. For example, the funding phase may include theissuance of a variable funding note 44. Requests for additional ordifferent gap enhancements or collateral security instruments may betransmitted to one or more insurance carriers 320 having a policy orproduct 20 in the plan 15.

Cash Management: After initial funding is underway or completed, thecash management phase of the plan 15 of the present invention may begin.The cash management phase, in one embodiment, may include the generalmanagement of the cash transactions and a general oversight of theapplication of the proceeds of the collateral, which is governed by oneor more agreements between the parties participating in the plan 15.

Management of the cash transactions within the plan 15 may beaccomplished through the use of an accounts management module 160, asillustrated in FIG. 2. The accounts management module 160 may beconfigured as part of the plan management module 140 of the computersystem 10 of the present invention. Online or electronic services may beused in order to execute certain funds exchanges, such as the automatedclearing house (ACH) network. The accounts management module 160 isdescribed in more detail below.

Levels of Funding

As described above, the system 10 of the present invention provides atechnical solution to the problem of analyzing and monitoring the gapamount of multiple policies, and thereby assessing the default exposurefor the underlying loans. The finance module 180 of the presentinvention, in one embodiment, may be used to combine a group of loansinto a portfolio, calculate an aggregate risk for the entire loanportfolio, calculate an aggregate yield for the portfolio, and providethese results to a credit provider in order to obtain financing onfavorable terms.

The plan 15 of the present invention, and the computer system 10 asdescribed above, facilitates access to funds at various levels offinancing on relatively attractive terms because of the quality of eachloan 40 as an asset. Creating access to funds is one of the technicaleffects of the present invention. In this aspect, the unique structureof the plan 15—together with the adequacy and the high quality of thecollateral for each loan and the multi-faceted gap enhancements providedby the system 10—creates access to a much larger pool of funds, fromvarious sources, that would otherwise be unavailable. As shown in FIG. 6and FIG. 7, the plan 15 produces high-quality loan assets sufficient toenable the initial loan originator 300 to:

-   -   (a) obtain a credit facility 42 from a initial credit provider        400 on favorable terms;    -   (b) sell a set of loans 46 in a true sale 36 to a loan purchaser        360, who may either:        -   (i) issue variable funding notes 44 to a VFN Purchaser 660,            and/or        -   (ii) prepare blocks of loans for trading as an asset-backed            security 90 or other security interest suitable for trading            in the capital markets by multiple investors 700.            Each successive level of funding represents, in general, an            increase in the amount of funds available and an improvement            in the financing terms or cost of funds.

At a first level, in response to the enhanced security of the underlyingloans, and the aggregate risk and yield calculated for the entire loanportfolio by the finance module 180, a credit provider may extend acredit facility for financing a pool of loans at more favorable termsthan would otherwise be available. Referring again to FIG. 6, the plan15 of the present invention includes a growing number of participatingemployers 200, each requesting a loan for a policy or product 20covering one or more of its employees 100. As the demand for the plan 15grows, the funds required for the loan originator 300 to issue multipleloans 40 also grows. Accordingly, the plan 15 in one embodiment mayinclude a funding bank referred to as the initial credit provider 400.The initial credit provider 400 may extend a line of credit or creditfacility 42 to the loan originator 300. The plan 15 may also include, asshown, a collateral agent 450 to act as a clearinghouse and agent formatters dealing with the credit facility 42. The plan 15 may alsoinclude, as shown, a backup servicing agent 410 for administration ofthe credit facility 42. The collateral agent 450 and backup servicer 410may be the same entity.

The initial credit provider 400 is willing and able to extend a creditfacility 42 to the loan originator 300, in large part, because of thegap enhancements and other collateral security instruments described.The underlying loans 40 enjoy a degree of security not found in otherplans. The extent of security provided may also improve the borrowingterms of the credit facility 42. In other words, the interest rate onthe credit facility 42 may be significantly lower because of the qualityof the loans 40. In this aspect, the unique structure of the plan 15,and the enhancements provided and monitored by the computer system 10,facilitates financing that would otherwise be unavailable for aninsurance product.

The present invention, in one embodiment, includes a credit facilityextended for the purpose of financing a plurality of loans 40participating in the plan 15 of the present invention. Because thecredit facility structure is made possible by the features and benefitsof the present invention, the credit facility structure is part of thepresent invention.

Financing by Variable Funding Note

At a second level, the system 10 of the present invention may be used toenhance a portfolio of loans to such a high level of security that ablock of loans may be financed using variable funding notes (VFNs) 44.The finance module 180, in one embodiment, may coordinate the issuanceand purchase of VFNs 44 in order to facilitate the financing of a blockof loans enhanced by the system 10 of the present invention.

Because the loans 40 are adequately secured, the plan 15 of the presentinvention may include financing by variable funding notes 44. The use ofVFNs 44 is generally limited to loan obligations that are secured byinterests in adequate and high-quality assets. In the plan 15 of thepresent invention, as shown in FIG. 6, the loan originator 300 maybundle loans 40 together into a set of loans 46 and sell them to a loanpurchaser 360. The loan purchaser 360 may then issue a variable fundingnote 44 which is bought by a VFN purchaser 660. The extent and qualityof the collateral security underlying the set of loans 46 vastlyimproves the terms of each VFN 44, thereby providing an attractivesource of funds for the loan originator 300. With the ability to obtainfunds at the favorable lending rate of VFNs, the loan originator 300 canoffer loans 40 at more attractive rates and otherwise improve thefunctioning of the plan 15. The VFNs, for example, also enable the loanoriginator 300 to rely less upon the initial credit facility 42, whichmay be limited to a certain maximum amount.

When the loan originator 300 receives the proceeds of the VFN 44, theloan originator 300 may make a payment to the initial credit provider400 and, in effect, pay down the balance due on the credit facility 42,so that more funds can be accessed using the credit facility 42. In thisaspect, the VFNs 44 help the loan originator 300 secure additionaloperating funds to make additional loans 40.

The system 10 of the present invention permits the use of VFNs 44 in thearea of life insurance and annuities. The system 10 facilitates accessto capital by aggregating a pool of smaller loans into a larger,diversified, hedgeable risk pool with manageable characteristics. Forboth the insured employee 100, and the contract owner/employer/borrower200, the pooling mechanism allows them to invest at long-term rates ingeneral account insurance and annuity products, while enabling the loanoriginator 300 to access capital at short-term rates.

The present invention, in one embodiment, includes a structured financesystem comprising one or more variable funding notes 44 issued for thepurpose of financing a plurality of loans 40 participating in the plan15 of the present invention.

Sale to a Special-Purpose Entity

At another level, the loan purchaser who issued one or more VFNs topurchase one or more blocks of loans may transfer a block of loans in atrue sale transaction to a bankruptcy-remote special-purpose entity 500.Such a transaction may be financed by an investment bank on termsgenerally more favorable than the original first-level credit facility,and often more favorable than the terms of the VFNs.

FIG. 7 is similar to FIG. 6, except for the special-purpose entity 500shown below the level of the loan purchaser 360. Instead of issuing avariable funding note 44, the loan purchaser 360 may sell the set ofloans 46 to a special-purpose entity 500 in a true sale transaction 36.

In one embodiment, the loan purchaser 360 may be established as aspecial-purpose entity 500 qualified to receive the block of loans in atrue sale transaction 36. In this embodiment, the two entities 360, 500as shown in FIG. 7 would collapse into one entity.

True sale is a legal concept related to whether the loans would beconsidered to be assets of the loan originator 300 or the loan purchaser360 in the event of a bankruptcy. If the loan originator 300 were tobecome insolvent and seek legal protection under the applicablebankruptcy laws, the true sale 36 acts to protect the loan purchaser 360from the potential delays and impairments of its rights to thecollateral. Outside the U.S., other countries have a legal conceptsimilar to true sale. The proceeds of the true sale transaction 36, ofcourse, provide funds to the loan originator 300. The proceeds of thetrue sale 36, for example, may be used to execute additional VFNs 44 orto pay down the credit facility 42.

Securitization & Trading

Just as the underlying security of the loans 40 facilitated the creditfacility 42 and the VFNs 44, the high quality and extent of thecollateral underlying the loans 40 in the plan 15 is sufficient topermit the loan purchaser 360 to transform each set of loans 46 into anasset-backed security 90. Typically, with the participation of aninvestment bank 600, the plan 15 of the present invention may includethe securitization of the sets of loans 46 held by the loan purchaser360. Each set of loans 46 may qualify as sufficient collateral tosupport the issuance of an asset-backed security 90, including forexample highly-rated commercial paper, VFNs, medium-term notes,longer-term debt instruments, or other securities suitable for tradingin the capital markets. As illustrated in FIG. 7, the plan 14 mayinclude the trading of blocks of loans to create an asset-backedsecurity 90 that may be bought and sold in the capital markets tomultiple investors 700.

The ability to securitize the loans related to the acquisition of aninsurance policy or product is made possible by the unique structure ofthe plan 15, and the enhancements provided and managed by the computersystem 10 of the present invention. Together with the inventivestructure of the plan 15, the computer system 10 creates an adequateamount of high-quality of collateral for each loan 40 provided by thegap enhancements and the various collateral security instruments.

The asset-backed securities 90 may create a new market for tradingblocks of insurance-related loans 40. The trading market may be similarin some ways to the market for mortgage loans. The plan 15 of thepresent invention may also include a companion system for tradingasset-backed securities 90.

The present invention, in one embodiment, includes a structured financesystem comprising one or more asset-backed securities 90 eachrepresenting an interest in one or more blocks or pools of loans 40executed according to the plan 15 of the present invention.

The present invention, in one embodiment, includes a method ofsecuritization of insurance-related loans executed according to the plan15 of the present invention.

Credit Default Swaps

As shown in FIG. 2, the system 10 may include a credit default swapmodule 800. When blocks of loans are grouped together and managed as aportfolio, the system 10 of the present invention may also be configuredto hedge or assist in the hedging of certain concentrated risks, such asthe carrier default exposure, through the derivatives marketplace forinsurance-based products.

Credit default swap premiums are established in many ways, includingprobability modeling of the default exposure for a given pool of assets.The pool may include assets of a specific carrier pool, which mayfurther define the credit exposure on a comparative basis. In thepresent invention, for example, a credit default swap premium may beestablished by analyzing a portfolio of loans 40 having similar creditspreads, terms, and credit quality; and the loans may be groupedtogether by carrier for analysis. Credit default spread premiums arebased on the recovery rate of the underlying assets, which may equal ata minimum the amount that can be recovered in the event of a default ofthat asset, and increased by any interim return or other asset valuebuild-up that occurs while the asset is held.

The credit default swap module 800 may be configured to provideregression modeling of the loans in a portfolio, analyze similarcharacteristics, historical spreads and returns, and provide predictivemodeling to inform the derivative marketplace for these insurance-basedproducts.

The module 800 may also be configured to track the range of events thatmight trigger the activation of rights under a credit default swap, suchas bankruptcy, failure to make timely payments, ratings downgrade belowthreshold amounts, and other similar events.

The module 800 may be further configured to identify similar assets thatmight be inserted in place of the defaulting asset, if a substitutionright exists in the swap, such that the risk is further reduced to thebuyer of the swap protection, which may further enhance the valueproposition of the present invention. The module 800 may also beconfigured to establish a valuation of assets within the pools and usesuch valuation for purposes of substitutions of assets or payouts underthe credit default swap instruments.

Accounts Management Module

The computer system 10 of the present invention represents a technicalsolution to the technical problems discussed in the background,including, for example, the accounts management module 160 of thecomputer system 10 which, in one embodiment, may be used to apply andallocate the loan payments received from multiple participatingborrowers 200 in order to satisfy the existing contract terms and todirect funds toward certain gap enhancement instruments selected by thesystem 10 during its periodic evaluation of the collateral securitysupporting each loan 40. In addition, the accounts management module 160of the present invention has the technical effect of producing anaccurate, verifiable, and auditable record of accounts.

The waterfall or cascade of funds paid or allocated to variousparticipating parties in these financing arrangements on a periodicbasis may be managed and executed, in one embodiment, by the accountsmanagement module 160 of the present invention. The funds within theplan 15 may be distributed between and among various accounts, accordingto one or more contractual agreements between and among theparticipating entities in the plan 15. As illustrated in FIG. 4, theaccounts 170 may include an originator cash account 161, a loanpurchaser cash account 162, a prepaid interest account 163, a cashreserve account 164, a loan purchaser operating account 165, anoriginator operating account 166, an originator escrow account 167, anda carrier escrow account 168.

The agreements between and among the participating entities in the plan15 may include a comprehensive set of rules and distribution schedulesfor the disbursement of payments and fees received during the life of apolicy 20 within the plan 15. As described above, the employer 200 maybe making interest-only payments on the loan 40 to the loan originator300. As illustrated in FIG. 6 and FIG. 7, the plan 15 includes a varietyof other entities. The accounts management module 160 may be configuredto perform the various calculations required to allocate the fundsbetween and among the various entities involved in the plan 15, and toinitiate and direct the execution of any funds transfers required by theagreements.

In one embodiment, the accounts management module 160 of the presentinvention may be configured to receive one or more payments in a period,and allocate the funds as described and required by the existingagreements. Money deposited into the originator cash account 161, forexample, may be held in trust by the collateral agent 450 and thenapplied in a particular order and in accordance with a set of prioritiesestablished in the agreements governing the plan 15. The followingexample illustrates the breadth and scope of the capability of theaccounts management module 160 to manage multiple accounts and toexecute multiple instructions according to established priorities withineach account.

The accounts management module 160 may be configured to receive anddeposit a portion the loan payments from the borrowers 200 into theoriginator cash account 161. First, a fee may be disbursed to thecollateral agent 450 or backup loan servicer 410 for their servicesduring the month or period. Second, a fee may be disbursed to the lenderor loan originator 300. Third, a fee may be disbursed to the loanservicer 310. Fourth, a fee may be paid to the initial credit provider400, in accordance with the terms and provisions of the credit facility42, for example. Fifth, an additional fee may be disbursed to thecollateral agent 450 or backup loan servicer 410. Sixth, the remaindermay be deposited into the loan originator operating account 166.

Next, the accounts management module 160 may be configured to receiveand deposit a portion the loan payments from the borrowers 200 into theloan purchaser cash account 162. First, a fee may be disbursed to thecollateral agent 450 or backup loan servicer 410 for their servicesduring the month or period. Second, a fee may be disbursed to the lenderor loan originator 300. Third, a fee may be disbursed to the loanservicer 310. Fourth, a fee may be disbursed to the collateral agent450, the paying agent, and the registrar. Fifth, a fee may be disbursedto the paying agent on behalf of the holders of the variable fundingnotes 44. Sixth, a deposit may be made to the prepaid interest account163. Seventh, an additional fee may be disbursed to the collateral agent450 or backup loan servicer 410. Eighth, a deposit may be made into acash reserve account 164. Ninth, the remainder may be deposited into theloan purchaser operating account 165.

The prepaid interest account 163 may be managed by the accountsmanagement module 160 which, in one embodiment, may be configured toreceive a deposit from the loan purchaser cash account 162, make apayment to the paying agent on behalf of the holders of the variablefunding notes 44, and then make payments to one or more borrowers 200 atthe direction of the loan servicer 310. The accounts management module160 may be configured, for example, to maintain a certain minimum amountin the prepaid interest account 163, such as an amount equal to twomonths of interest on the one or more variable funding notes 44. In thisaspect, the accounts management module 160 facilitates compliance withthe one or more agreements between and among the parties, facilitatesthe efficient operation of the plan 15 and system 10 of the presentinvention, and produces an accurate, verifiable, and auditable record ofaccounts.

The cash reserve account 164 may be managed by the accounts managementmodule 160 which, in one embodiment, may be configured to receive adeposit from the loan purchaser cash account 162, make a payment to thepaying agent on behalf of the holders of the variable funding notes 44,and then move an excess amount to the loan purchaser operating account165. The accounts management module 160 may be configured, for example,to maintain a certain minimum amount in the cash reserve account 164,such as an amount equal to two percent (2%) of the one or more variablefunding notes 44. In this aspect, the accounts management module 160facilitates compliance with the one or more agreements between and amongthe parties and also provides a level of cash security for the loanportfolio under management.

The loan purchaser operating account 165 may be managed by the accountsmanagement module 160 which, in one embodiment, may be configured toreceive a deposit from the loan purchaser cash account 162, receive adeposit from the cash reserve account 164, and receive a deposit at thedirection of the loan purchaser 360. The accounts management module 160may be configured, for example, to maintain a certain minimum amount inthe loan purchaser operating account 165, such as an amount equal to thebalance held in the cash reserve account 164. In this aspect, theaccounts management module 160 facilitates compliance with the one ormore agreements between and among the parties and also provides a levelof cash security and liquidity for the participating loan purchaser 360.

In cooperation with the other modules of the computer system 10, and theinformation stored in the data tables 210, the accounts managementmodule 160 may be configured to monitor and track a plurality ofvariable funding notes 44 including the current balance, the totalamount committed, and other information important to the efficient andaccurate management of the funds in the system. The accounts managementmodule 160 may also be configured to monitor the applicable interestrate for the month or period, based on one of the indices for example,such as the London Interbank Offered Rate (LIBOR), including theapplicable interest rate for each of a plurality of variable fundingnotes 44 and the interest paid on the current balance during the period.In this aspect, the accounts management module 160 monitors and tracksthe actual interest payments for each set of loans and each VFN 44, andproduces an accurate, verifiable, and auditable record.

As illustrated by the preceding example, the accounts management module160 of the present invention facilitates compliance with the one or moreagreements between and among the parties, facilitates the efficientoperation of the plan 15 and system 10 of the present invention, andproduces an accurate, verifiable, and auditable record of accounts.

Plan Administration Module

As shown in FIG. 2, the system 10 of the present invention may include aplan administration module 145. In one embodiment, the planadministration module 145 may generate annual mailings of planadministration information packets to the participating borrowers forreference when preparing their annual income tax forms. The packet maycontain basic information on the back-to-back loan arrangement (i.e., aSection 7872 loan arrangement, under the U.S. Internal Revenue Code),instructions regarding accounting under generally-accepted accountingprinciples (GAAP), the calculation of loan interest paid, andinformation regarding the number of days the policy or annuity has beenin force during the calendar year. A template report document may belinked and generated via an ODBC connection, with specificationinformation for each borrower being retrieved from the data tables 210and inserted in to the appropriate fields in the template. The planadministration module 145 may be configured to calculate the loaninterest automatically. The packets may also be used to promote certainpolicies or products to potential borrowers, including reminders relatedto the potential purchase of a policy or product for any new keyemployees who were hired recently. In this aspect, the planadministration module 145 may be used to produce information provided tothe borrower as a service, and it may also be used to generatepromotional information and reminders.

In one embodiment, the plan administration module 145 may be configuredto monitor and track loan portfolio value over time, so that if and whencash is removed, an unintentional lapse of any policy is avoided,thereby protecting the collateral. Similarly, the plan administrationmodule 145 may be configured to track loan portfolio value andcoordinate the timing of death benefit reductions, in order to ensurelong-term cash accumulation, thereby protecting the collateral as wellas the clients and other participating entities. The death benefitreduction may change over time, as interest rates change, in order toprotect the collateral. The plan administration module 145 monitors andtracks the desired amount of the death benefit reduction on an ongoingbasis, calculates or re-calculates the amount, and may be configured tonotify the loan originator or other participating entity when anadjustment in the death benefit reduction is due and proper, and by howmuch.

System Architecture

In several of the embodiments of the invention referenced herein, acomputer is referenced. The computer, for example, may be a mainframe,desktop, notebook or laptop, hand-held, or a handheld device such as adata acquisition and storage device. Turning to FIG. 9, one embodimentof a computer is illustrated that can be used to practice aspects of thepresent invention. In FIG. 9, a processor 2301, such as amicroprocessor, is used to execute software instructions for carryingout the defined steps. The processor 2301 receives power from a powersupply 2317 that may also provide power to the other components asnecessary. The processor 2301 communicates using a data bus 2305 that istypically sixteen or thirty-two bits wide (e.g., in parallel). The databus 2305 is used to convey data and program instructions, typically,between the processor 2301 and the memory. In the present embodiment,the memory may be considered to include a volatile primary memory 2302such as RAM or another form of memory which retains the contents onlyduring operation, or it may be non-volatile 2303, such as ROM, EPROM,EEPROM, FLASH, or other types of memory that retain the memory contentsat all times. The memory could also be secondary memory 2304, such asdisk storage, that stores large amount of data. In some embodiments, thedisk storage may communicate with the processor using an I/O bus 2306instead or a dedicated bus (not shown). The secondary memory may be afloppy disk, hard disk, compact disk, DVD, or any other type of massstorage type known to those skilled in the computer arts.

The processor 2301 also communicates with various peripherals orexternal devices using an I/O bus 2306. In the present embodiment, aperipheral I/O controller 2307 is used to provide standard interfaces,such as RS-232, RS-422, DIN, USB, IDE, SCSI, SATA, FireWire, Bluetooth,or other interfaces as appropriate to interface various input/outputdevices. Typical input/output devices include local printers 2318, amonitor 2308, a keyboard 2309, and a mouse 2310 or other pointingdevices (e.g., rollerball, trackpad, joystick, and the like).

The processor 2301 typically also communicates using a communicationsI/O controller 2311 with external communication networks, and may use avariety of interfaces 2312 such as data communication oriented protocolssuch as X.25, ISDN, T-1, T-3, OC-3, OC-12, satellite, DSL, cable modems,and the like. The communications controller 2311 may also incorporate amodem (not shown) for interfacing and communicating with a standardtelephone line 2313. Finally, the communications I/O controller mayincorporate an Ethernet interface 2314 for communicating over a LAN. Anyof these interfaces may be used to access the Internet, intranets, LANs,or other data communication facilities.

Finally, the processor 2301 may communicate with one or more wirelessinterfaces 2316 operatively connected to one or more antennae 2315 forcommunicating wirelessly with another devices, using for example, one ofthe IEEE 802.11 protocols, the 802.15.4 protocol, the 802.17 protocol,or any of the standard 3G wireless telecommunications protocols, such asCDMA2000 1x EV-DO, GPRS, GMPRS, W-CDMA, or any other suitable protocol.

An alternative embodiment of a processing system that may be used isshown in FIG. 5. In this embodiment, a distributed communication andprocessing architecture is shown involving a server 2320 communicatingwith either a local client computer 2326 a or a remote client computer2326 b. The server 2320 typically comprises a processor 2321 thatcommunicates with a data storage system including a database 2322,through the utilization of a secondary memory, as well as primary memory2324. The processor also communicates with external devices using an I/Ocontroller 2323 that typically interfaces with a LAN 2325. The LAN mayprovide local connectivity to one or more networked printers 2328 andone or more local client computers 2326 a. The networked printers 2328may be located in the same facility as the server, though notnecessarily in the same room. Communication with remote devicestypically is accomplished by routing data from the LAN 2325 over acommunications facility to the Internet 2327. A remote client computer2326 b may be used to establish remote connectivity to a server 2320over a Wide Area Network (WAN), a remote desktop session, or a VirtualPrivate Network (VPN) so the remote client 2326 b may interact with theserver, as required, by data transmitted through the Internet 2327, overthe LAN 2325 or WAN or VPN, to the server 2320.

Those skilled in the art of data networking will realize that many otheralternatives and architectures are possible and can be used to practicethe principles of the present invention. The embodiments illustrated inFIG. 9 and FIG. 10 can be modified in different ways and be within thescope of the present invention as claimed.

In one embodiment, as illustrated in FIG. 10, the architecture mayinclude one or more servers 2320, one or more computer networks, and oneor more local or remote clients 2326 a, 2326 b distributed in amulti-tiered client-server relationship. The one or more computernetworks may include a variety of types of computer networks such as theinternet 2327, a private intranet, a private extranet, a public switchtelephone network (PSTN), a wide area network (WAN), a local areanetwork (LAN) 2325, or any other type of network known in the art. Thenetwork, such as the LAN 2325, facilitates communications between theserver 2320 and the one or more local clients 2326 a. The LAN 2325 andthe internet 2327 facilitate communications between the server 2320 andthe one or more remote clients 2326 b. Communication between two or morecomputer components may including, for example, a network transfer, afile transfer, an applet transfer, an Open Database Connectivity (ODBC)connection, a document mail merge, an e-mail, a Hyper-Text TransferProtocol (HTTP) message, an XML message, a datagram, an object transfer,a binary large object (BLOB) transfer, and so on. The present invention,in one embodiment, uses the internet 2327 and its highly-efficienttransmission protocols to send short, quick, efficient messages and databetween and among the various computing components. In this aspect, thepresent invention is optimized for efficient communications and datatransfer.

CONCLUSION

The described embodiments of the invention are intended to be merelyexemplary. Of course, it is not possible to describe every conceivablecombination of components or methodologies for purposes of describingthe systems, methods, and apparatuses for accomplishing the variousobjectives of the invention. One of ordinary skill in the art mayrecognize that further combinations and permutations are possible.Accordingly, this application is intended to embrace alterations,modifications, and variations that fall within the scope of the appendedclaims and their equivalents.

1. A system for facilitating a financing structure, said systemcomprising: a network; one or more databases located on a data storagesystem and comprising: (a) product data representative of one or moreproducts, said products each comprising a financial instrument thatemploys or accomplishes a form of risk transfer and has an investedportion or component having a potential to grow in value over time; and(b) portfolio data representative of a portfolio of loans, each loanobtained by a borrower from a loan originator to purchase said one ormore of said products; a processor configured to execute a gapenhancement module configured for: retrieving said portfolio data andsaid product data from said one or more databases; generating one ormore gap enhancement instruments for execution by one or more executingparties other than the borrower, said one or more gap enhancementinstruments each addressing a current gap value based upon at least aportion of said product data representative of a respective one of theproducts and said current gap value representing the difference betweena premium paid and a value of said respective product, said one or moregap enhancement instruments comprising: (a) a collateral assignment ofsaid respective product executed by one or more assigning parties otherthan the borrower in favor of said borrower; (b) a compensationagreement between an employee of said borrower and said borrower; (c) anagreement to postpone payment of a portion of a commission earned on thesale of said respective product; (d) a rider on said respective productwaiving a portion of a surrender fee in favor of an affected loanoriginator, said surrender fee representing an amount charged in theevent said respective product is surrendered or said borrower defaultson one or more of said loans associated with said respective product;(e) an agreement to deposit funds in a reserve account, said fundsrepresenting a portion of a surrender fee, said surrender feerepresenting an amount charged in the event said respective product issurrendered or said borrower defaults on one or more of said loansassociated with said respective product; (f) an agreement by one or morelending parties other than the borrower, in the event of a surrender ordefault event, to extend a gap loan to said loan originator in an amountapproximately equal to said current gap value, a repayment obligation ofsaid loan originator to said one or more lending parties other than theborrower being ultimately secured by a pledged asset; or (g) anagreement by one or more paying parties other than the borrower to pay amarketing allowance to said loan originator, said marketing allowanceincluding a portion of the costs associated with marketing saidrespective product; receiving and storing in said one or more databasesenhancement data representative of execution of said one or more gapenhancement instruments by said one or more executing parties other thanthe borrower, said enhancement data being stored in association withsaid product data; wherein said enhancement data supports a creditfacility, for funding said portfolio of loans, having terms morefavorable to said borrower than alternative terms available in theabsence of said enhancement data; and a communications controllerconfigured for transmitting said product, portfolio and enhancement dataover said network.
 2. The system for facilitating the financingstructure of claim 1, wherein said terms are more favorable than wouldbe available for an individual loan selected from said portfolio ofloans.
 3. The system for facilitating the financing structure of claim1, wherein said collateral assignment of said respective product isexecuted by said one or more assigning parties other than the borrowersin favor of said loan originator.
 4. The system for facilitating thefinancing structure of claim 1, wherein said portfolio of loans has anaggregate risk based on said current gap values of the one or moreproducts associated with said portfolio of loans, said aggregate riskreduced at least in part by said execution of said one or more gapenhancement instruments by said one or more executing parties other thanthe borrower, and wherein said aggregate risk and said enhancement dataare of sufficient quality to permit a purchase of one or more variablefunding notes (VFN) by a VFN purchaser, to finance a purchase of saidportfolio of loans by said VFN purchaser.
 5. The system for facilitatingthe financing structure of claim 1, wherein said portfolio of loans hasan aggregate risk based on said current gap values of the respectiveproducts associated with said portfolio of loans, said aggregate riskreduced at least in part by said execution of said one or more gapenhancement instruments by said one or more executing parties other thanthe borrower, and wherein said aggregate risk and said enhancement dataare of sufficient quality to permit a bankruptcy-remote special purposeentity to receive at least a portion of said portfolio of loans in atrue sale transaction.
 6. The system for facilitating the financingstructure of claim 1, wherein said portfolio of loans has an aggregaterisk based on said current gap values of the respective productsassociated with said portfolio of loans, said aggregate risk reduced atleast in part by said execution of said one or more gap enhancementinstruments by said one or more executing parties other than theborrowers, and wherein said aggregate risk and said enhancement data areof sufficient quality to support an issuance of asset-backed securityinterests in said portfolio of loans, suitable for trading in thecapital markets to multiple investors.
 7. The system for facilitatingthe financing structure of claim 6, wherein said asset-backed securityinterests comprise commercial paper.
 8. The system for facilitating thefinancing structure of claim 6, wherein said asset-backed securityinterests comprise a ratable pool of asset-backed securities.
 9. Thesystem for facilitating the financing structure of claim 1, wherein saidsystem further comprises a display device configured for displaying saidproduct, portfolio and enhancement data.
 10. The system for facilitatingthe financing structure of claim 1, wherein said gap enhancement moduleis further configured for calculating, based upon said product data,said current gap value associated with said product.
 11. The system forfacilitating the financing structure of claim 1, wherein said gapenhancement module is further configured for comparing one or more ofsaid gap enhancement instruments to a set of parameters.
 12. The systemfor facilitating the financing structure of claim 11, wherein said setof parameters comprises at least one of: (1) a relative value of each ofsaid one or more gap enhancement instruments; (2) a net cost ofexecuting each of said one or more gap enhancement instruments; or (3)an ease of obtaining each of said one or more gap enhancementinstruments.
 13. The system for facilitating the financing structure ofclaim 12, wherein said gap enhancement module is further configured forselecting one or more of said gap enhancement instruments based on oneor more of said parameters.
 14. The system for facilitating thefinancing structure of claim 1, wherein said product comprises a lifeinsurance policy or an annuity contract.
 15. The system for facilitatingthe financing structure of claim 1, wherein said agreement to extendsaid gap loan comprises an agreement by an insurance carrier that haswritten one of said products on an employee of the borrower; and whereinsaid pledged asset securing repayment of said gap loan comprisesaccounts receivable of said borrower.
 16. A system for facilitating abusiness structure, said system comprising: a memory configured forstoring data in one or more databases located on a data storage system,said data comprising: loan data representative of a loan obtained by aborrower from a loan originator; and product data representative of aproduct purchased using proceeds of said loan and naming an employee ofthe borrower as an insured, wherein said product comprises a financialinstrument that employs or accomplishes a form of risk transfer and hasan invested portion or component having a potential to grow in valueover time, wherein said product has a current gap value, said currentgap value being based upon said product data and representing thedifference between a premium paid and a value of said product; and aprocessor coupled to said memory and configured to perform stepscomprising: generating one or more gap enhancement instruments forexecution by one or more executing parties other than the borrower, saidone or more gap enhancement instruments each addressing said current gapvalue, said one or more gap enhancement instruments comprising: (a) acollateral assignment of said product executed by one or more assigningparties other than the borrower in favor of said borrower; (b) acompensation agreement between said employee of said borrower and saidborrower; (c) an agreement to postpone payment of a portion of acommission earned on a sale of said product; (d) a rider on said productwaiving a portion of a surrender fee in favor of an affected loanoriginator, said surrender fee representing an amount charged in theevent said product is surrendered or said borrower defaults on saidloan; (e) an agreement to deposit funds in a reserve account, said fundsrepresenting a portion of a surrender fee, said surrender feerepresenting an amount charged in the event said product is surrenderedor said borrower defaults on said loan; (f) an agreement by one or morelending parties other than the borrower, in the event of a surrender ordefault event, to extend a gap loan to an affected loan originator in anamount approximately equal to said current gap value, wherein saidaffected loan originator's repayment obligation to said one or morelending parties other than the borrower is ultimately secured by apledged asset; or (g) an agreement by one or more paying parties otherthan the borrower to pay a marketing allowance to one or more of saidloan originators, said marketing allowance including a portion of thecosts associated with marketing said product; receiving and storing insaid one or more databases enhancement data representative of executionof said one or more gap enhancement instruments by said one or moreexecuting parties other than the borrower, said enhancement data beingstored in association with said product data; wherein said enhancementdata supports a credit facility, for funding said loan, having termsmore favorable to said borrower than alternative terms available in theabsence of said enhancement data.
 17. The system for facilitating thebusiness structure of claim 16, wherein said collateral assignment ofsaid product is executed in favor of said loan originator.
 18. Thesystem for facilitating the business structure of claim 16, said systemfurther comprising: a network; said memory further configured forstoring portfolio data representative of a portfolio of a plurality ofsaid loans in said one or more databases, wherein said portfolio dataincludes an aggregate risk based on the respective current gap values ofthe products associated with said portfolio of the plurality of saidloans, said aggregate risk reduced at least in part by said execution ofsaid one or more gap enhancement instruments by said processor; whereinsaid aggregate risk and said enhancement data are of sufficient qualityto permit a purchase of one or more variable funding notes (VFN) by aVFN purchaser, to finance a purchase of said portfolio of the pluralityof said loans; a display device configured for displaying said product,said loan, said portfolio of the plurality of said loans and saidenhancement data; and a communications controller configured fortransmitting said product, said loan, said portfolio of the plurality ofsaid loans and said enhancement data over said network.
 19. The systemfor facilitating the business structure of claim 18, wherein said creditfacility terms are more favorable than alternative terms available inthe absence of said enhancement data for an individual loan selectedfrom said portfolio of the plurality of said loans.
 20. The system forfacilitating the business structure of claim 18, wherein said aggregaterisk and said enhancement data are of sufficient quality to permit abankruptcy-remote special purpose entity to receive at least a portionof said portfolio of the plurality of said loans in a true saletransaction.
 21. The system for facilitating the business structure ofclaim 18, wherein said aggregate risk and said enhancement data are ofsufficient quality to support issuance of asset-backed securityinterests in said portfolio of the plurality of said loans, suitable fortrading in the capital markets to multiple investors.
 22. The system forfacilitating the business structure of claim 21, wherein saidasset-backed security interests comprise commercial paper.
 23. Thesystem for facilitating the business structure of claim 21, wherein saidasset-backed security interests comprise a ratable pool of asset-backedsecurities.
 24. The system for facilitating the business structure ofclaim 16, wherein said product comprises a life insurance policy or anannuity contract.
 25. The system for facilitating the business structureof claim 16, wherein said agreement to extend said gap loan comprises anagreement by an insurance carrier that has written one of said productson an employee of the borrower; and wherein said pledged asset securingrepayment of said gap loan comprises accounts receivable of saidborrower.
 26. A computer program product, comprising a computer-readablestorage medium having an executable program code stored thereon, whereinsaid program code instructs a processor to perform steps forfacilitating acquisition of a credit facility for a plurality of loansprovided by a loan originator to one or more borrowers, said stepscomprising: A) accessing one or more databases and distinct softwaremodules, wherein said one or more databases are located on a datastorage system, and wherein said distinct software modules comprise agap enhancement module and a computer program module; B) retrievingproduct data representative of a product, said product comprising afinancial instrument that employs or accomplishes a form of risktransfer and has an invested portion or component having a potential togrow in value over time, wherein said retrieving is performed by saidgap enhancement module in response to being called by said computerprogram module; C) retrieving from said one or more databases portfoliodata representative of a portfolio of loans, each loan obtained by aborrower from a loan originator, wherein said retrieving is performed bysaid gap enhancement module in response to being called by said computerprogram module; D) generating one or more gap enhancement instrumentsfor execution by one or more executing parties other than the borrower,said one or more gap enhancement instruments each addressing a currentgap value based upon product data representative of a respective one ofthe products and said current gap value representing the differencebetween a premium paid and a value of said respective product, andwherein said generating is performed by said gap enhancement module inresponse to being called by said computer program module; and E)receiving and storing in said one or more databases enhancement datarepresentative of said execution of said one or more gap enhancementinstruments by said one or more executing parties other than theborrower, wherein said enhancement data is stored in association withsaid product data, wherein said enhancement data supports a creditfacility for funding said portfolio of loans, said credit facilityprovided to said loan originator by a credit provider, said creditfacility having terms more favorable to said borrower than alternativeterms available in the absence of said enhancement data, and whereinsaid receiving and storing is performed by said gap enhancement modulein response to being called by said computer program module.
 27. Thecomputer program product of claim 26, further comprising a step ofdisplaying said product, portfolio and enhancement data on a displaydevice, wherein said displaying is performed by said display device inresponse to being called by said computer program module.
 28. Thecomputer program product of claim 26, further comprising a step of,prior to step “C”, calculating, based upon said product data, thecurrent gap value associated with said product, wherein said calculatingis performed by said gap enhancement module in response to being calledby said computer program module.
 29. The computer program product ofclaim 26, further comprising a step of, prior to step “C”, comparing,based upon a set of parameters, the current gap value associated withsaid product to a user-defined limit associated with said product,wherein said comparing is performed by said gap enhancement module inresponse to being called by said computer program module.
 30. Thecomputer program product of claim 29, wherein during said step ofcomparing, said set of parameters comprises at least one of: (1) arelative value of each of said one or more gap enhancement instruments;(2) a net cost of executing each of said one or more gap enhancementinstruments; or (3) an ease of obtaining each of said one or more gapenhancement instruments.
 31. The computer program product of claim 29,further comprising a step of, subsequent to said step of comparing andprior to step “C”, selecting one or more of said one or more gapenhancement instruments based on one or more of said parameters.
 32. Acomputer-implemented method for facilitating a financing structure, saidmethod comprising: A) accessing one or more databases located on a datastorage system by one or more computer devices comprising at least oneprocessor; B) retrieving by said processor product data representativeof a product, said product comprising a financial instrument thatemploys or accomplishes a form of risk transfer and has an investedportion or component having a potential to grow in value over time; C)retrieving by said processor portfolio data representative of aportfolio of loans, each loan obtained by a borrower from a loanoriginator to purchase said product; and D) executing by said processora gap enhancement module of said one or more computer devices to: (1)generate one or more gap enhancement instruments for execution by one ormore executing parties other than the borrower, said one or more gapenhancement instruments each addressing a current gap value based uponproduct data representative of a respective one of the products and saidcurrent gap value representing the difference between a premium paid anda value of said respective product; and (2) receive and store in saidone or more databases enhancement data representative of said executionof said one or more gap enhancement instruments by said one or moreexecuting parties other than the borrower, said enhancement data beingstored in association with said product data, said enhancement datasupporting a credit facility for funding said portfolio of loans, havingterms more favorable to said borrower than alternative terms availablein the absence of said enhancement data.
 33. The computer-implementedmethod of claim 32, further comprising a step of displaying saidproduct, portfolio and enhancement data on a display device.
 34. Thecomputer-implemented method of claim 32, wherein during step “D 2”, saidone or more gap enhancement instruments comprise: (a) a collateralassignment of said product executed by one or more assigning partiesother than the borrower in favor of said borrower; (b) a compensationagreement between an employee of said borrower and said borrower; (c) anagreement to postpone payment of a portion of a commission earned on asale of said product; (d) a rider on said product waiving a portion of asurrender fee in favor of an affected loan originator, said surrenderfee representing an amount charged in the event said product issurrendered or said borrower defaults on one or more of said loans; (e)an agreement to deposit funds in a reserve account, said fundsrepresenting a portion of a surrender fee, said surrender feerepresenting an amount charged in the event said product is surrenderedor said borrower defaults on one or more of said loans; (f) an agreementby one or more lending parties other than the borrower, in the event ofa surrender or default event, to extend a gap loan to an affected loanoriginator in an amount approximately equal to said current gap value,wherein said affected loan originator's repayment obligation to said oneor more lending parties other than the borrower is ultimately secured bya pledged asset; or (g) an agreement by one or more paying parties otherthan the borrower to pay a marketing allowance to one or more of saidloan originators, said marketing allowance including a portion of thecosts associated with marketing said product.
 35. Thecomputer-implemented method of claim 34, wherein said agreement toextend said gap loan comprises an agreement by an insurance carrier thathas written one of said products on an employee of the borrower; andwherein said pledged asset securing repayment of said gap loan comprisesaccounts receivable of said borrower.